*7 


OPINION 


OF  THE 


SUPREME  JUDICIAL  COURT 


OF  MASSACHUSETTS, 


IN  THE  CASE  OF 


WILLIAM  EAGER  vs.  THE  ATLAS  INS.  CO. 


WITH 


REMARKS  THEREON, 


BY  AN  UNDERWRITER. 


BOSTON: 


JOHN.  H.  EASTBURN,  PRINTER 


1833. 


* 


E  It  It  A  T  A  . 


jth  pajrc, 

Tth  line  from  top,  for  a  effect,”  read  affect. 

2  2d 

CC 

6th  line  from  bottom,  for  “  insured,”  read  insurer. 

31st 

CC 

6th 

u 

cc 

top,  for  “defendant’s”  read  defendants 

u 

cc 

14th 

cc 

cc 

“  dele  “  as”. 

32d 

cc 

14th 

u 

cc 

“  for  “  insured,”  read  insurer. 

35  th 

cc 

4th 

cc 

cc 

“  for  “  costs,”  read  cost. 

u 

cc 

9th 

cc 

cc 

«  for  “  insurer,”  read  insured. 

u 

u 

3  th 

cc 

cc 

bottom,  for  “  466,67,”  read  600. 

45th 

u 

6  th 

cc 

cc 

“  for  “  loss,”  read  lost. 

90 t  if of 


SUFFOLK,  S  S  . 


SUPREME  JUDICIAL  COURT,  MARCH  TERM,  1833. 

WILLIAM  EAGER  v.  THE  ATLAS  INS.  CO. 

WILDE  J.  DELIVERED  THE  OPINION  OF  THE  COURT. 


This  case  is  submitted  to  our  consideration,  upon 
an  agreed  statement  of  facts,  for  the  purpose  of  ob¬ 
taining  a  revision  of  one  of  the  points  decided  in  the 
case  of  Brooks  vs.  The  Oriental  Insurance  Company  ; 
and  as  that  decision  was  made  without  a  very  full  dis¬ 
cussion,  though  certainly  not  without  consideration, 
wehave  very  willingly  re-examined  the  subject.  But 
after  fully  considering  the  arguments  and  opinions  to 
which  we  have  been  referred,  in  which  the  ques¬ 
tion  is  discussed  with  great  ability,  and  after  due  de¬ 
liberation,  we  have  been  unable  to  perceive  any  suf¬ 
ficient  reason  for  overruling  our  former  decision  — 
On  the  contrary,  a  more  close  and  thorough  examin¬ 
ation  of  the  principles  and  the  reasons  of  that  de¬ 
cision  has  rather  tended  to  strengthen  and  confirm 
our  confidence  in  its  correctness. 

The  question  to  be  re-considered  is,  whether  in 
adjusting  a  partial  loss  on  a  vessel  after  repairs  made, 
the  deduction  of  one  third  from  the  whole  expenses 


4 


of  the  repairs  is  to  be  made,  for  the  substitution  of 
new  materials  and  work  for  old  ;  or  whether  the 
proceeds  of  the  old  materials  not  used  in  the  repairs 
should  be  first  deducted,  and  the  one  third  be  taken 
from  the  residue. 

Another  question  arises  from  the  facts  agreed, 
which  was  not  considered  in  the  case  of  Brooks  v. 
The  Oriental  Ins.  Co.  and  which  depends  on  the 
usage  of  the  insurance  offices  of  Boston,  and  “  the 
rules  and  customs  of  assurance”  referred  to  in  the 
policy.  This  question,  if  determined  in  favor  of  the 
defendants  will  be  decisive,  and  we  have  therefore 
attentively  examined  the  grounds  upon  which  it  ap¬ 
pears  to  us  to  depend.  The  result  of  the  examina¬ 
tion  I  will  now  briefly  state. 

It  is  agreed  by  the  parties,  that  at  the  time  of  the 
underwriting  the  policy,  and  at  the  time  of  the  loss, 
it  was  the  usage  of  the  insurance  offices  then  ex¬ 
isting  in  Boston,  in  adjusting  a  partial  loss,  to  deduct 
one  third  new  for  old  from  the  gross  amount  of  the 
expenses  of  repair.  And  it  appears  by  the  policy, 
that,  in  the  clause  enumerating  the  perils  insured 
against,  after  specifying  the  seas,  fire,  enemies,  &c. 
there  is  added,  “  and  all  other  losses  and  misfortunes, 
w  hich  have  or  shall  come  to  the  damage  of  the  said 
ship,  to  which  insurers  are  liable  by  the  rules  and 
customs  of  insurance  in  Boston.”  The  defendant’s 
counsel  contend  that  this  clause  in  the  policy,  coup¬ 
led  wdth  the  usage  before  stated,  must  so  control 
the  construction  of  the  contract,  as  to  settle  the  pre¬ 
sent  question  in  their  favor,  whatever  may  be  the 
general  rule  of  law  as  to  the  adjustment  of  similar 
losses  in  other  cases. 

That  a  local  usage,  as  well  as  general  usages  of 
trade,  may  materially  affect  the  construction  of  *. 


b 


contract,  cannot  be  denied  ;  but  to  have  this  effect 
such  usage  must  appear  to  be  so  well  settled,  and  of  so 
long  a  continuance  as  to  raise  a  fair  presumption  that 
it  was  known  to  both  contracting  parties,  and  that 
the  contract  was  made  in  reference  to  it.  Such  a 
presumption  is  the  only  basis,  on  which  any  local  or 
particular  usage  can  be  sustained  so  as  to  effect  the 
construction  of  a  contract.  The  usages  or  customs 
of  particular  places  are  not  binding  unless  the  par¬ 
ties  contract  in  reference  to  them,  and  if  their  agree¬ 
ment  be  reduced  to  writing,  the  reference  ought  to 
appear  by  the  terms  of  the  contract.  To  allow  par¬ 
ticular  usages  to  control  or  vary  the  construction  and 
legal  effect  of  a  written  contract  would  be  repug¬ 
nant  to  the  rules  of  evidence  and  might  be  followed 
by  perilous  and  mischievous  consequences.  Courts 
take  no  notice  of  these  local  and  particular  usages  ; 
they  are  to  be  proved  like  other  facts  and  necessari¬ 
ly  by  parol  evidence.  Gordon  v.  Little,  8  Serg.  and 
R.  557  :  3  Rawle,  103;  1  Caines,  44. 

But  if  parol  evidence  were  admissible  and  partic¬ 
ular  usages  might  control  or  vary  the  construction  oi 
a  written  contract,  an  insuperable  objection  to  the 
defence,  so  far  as  it  depends  on  the  question  of  usage, 
would  remain.  For  whatever  may  have  been  the 
usage  and  however  well  known,  it  can  have  no  effect 
on  the  contract,  unless  it  was  adopted  by  the  parties, 
and  the  contract  was  made  in  reference  to  it ;  of  this 
there  is  no  proof,  nor  ground  o  presumption  ;  on  the 
contrary  the  terms  of  the  contract  strongly  rebut  any 
such  presumption.  It  has  been  already  remarked, 
that  the  rules  and  customs  of  nsurance  in  Boston 
are  expressly  referred  to  in  the  po  'ey,  but  for  a  pur¬ 
pose  foreign  to  the  present  question.  That  reference 
was  introduced  for  the  purpose  of  designating  the 


6 


perils  insured  against,  and  of  supplying  any  omission 
in  the  list  of  those  which  are  enumerated  ;  but  it  has 
no  relation  to  the  mode  of  adjusting  a  partial  loss. 
There  are  stipulations  in  the  policy  touching  par¬ 
tial  losses,  but  none  in  respect  to  the  question  now 
to  be  considered.  This  question  had  been  settled  in 
New  York  years  before  this  policy  was  underwrit¬ 
ten,  and  for  some  time  before  had  been  pending  in 
this  Court  for  decision.  From  these  and  other  cir¬ 
cumstances,  the  presumption  is  strong,  that  the  par¬ 
ties  did  not  treat  as  to  the  mode  of  adjustment,  on 
the  basis  of  usage,  but  on  that  of  existing  law,  how¬ 
ever  it  misfit  be  decided.  When  the  contract  refers 
to  “  the  customs  and  rules  of  insurance  in  Boston” 
and  specifies  how  far  they  shall  constitute  a  part  of 
the  contract,  it  must  be  inferred  that  the  parties  did 
not  intend  that  it  should  be  affected  thereby  beyond 
the  extent  specified  ;  especially  as  the  form  of  the 
policy  was  no  doubt  settled  and  adopted  with  great 
care  and  deliberation. 

These  considerations  appear  to  us  quite  sufficient  to 
settle  the  question  of  usage,  but  other  considerations 
might  be  added  if  necessary.  The  usage  relied  upon 
by  the  defendants  is  opposed  to  the  essence  of  the 
contract  of  insurance  which  is  a  contract  of  indem¬ 
nity.  That  the  usage,  if  applied  to  the  contract, 
would  deprive  the  assured  of  a  full  indemnity  and 
give  to  the  underwriters  an  unreasonable  advantage, 
I  shall  endeavour  to  show  in  discussing  the  principal 
question.  The  usage  is  also  opposed  to  the  rule  of 
law,  as  we  understand  it,  by  which  partial  losses 
when  vessels  have  been  repaired,  are  to  be  adjusted. 
The  rule  of  deducting  one  third  new  for  old  proba¬ 
bly  originated  in  usage,  but  it  has  been  long  known 
and  settled  in  the  commercial  world  and  has  been 


7 


adopted  by  courts,  so  that  it  is  now  a  well  set¬ 
tled  principle  of  law.  Now  it  seems  to  me  very 
clear,  that  no  particular  usage  opposed  to  the  estab¬ 
lished  principles  of  law  can  be  sustained.  And  so 
it  was  decided  in  the  case  of  Homer  v.  Dorr,  10 
Mass.  R.  26.  The  insurance  was  on  property  laden 
on  freight  from  Boston  to  Archangel  and  back  to 
Boston  taking  the  risk  on  shore  as  well  as  on  board. 
In  an  action  on  the  premium  note,  it  was  held  that 
the  whole  note  W'as  recoverable,  although  no  proper¬ 
ty  was  returned  in  the  ship  ;  and  it  was  proved  to 
be  the  universal  usage  in  Boston,  where  the  insurance 
was  effected,  to  return  a  portion  of  the  premium  in 
such  cases.  Again  if  local  usages  are  to  be  admit¬ 
ted  to  control  the  rule  in  question,  the  object  and 
intention  of  the  rule  will  be  defeated.  It  was  adop¬ 
ted  for  the  sake  of  convenience,  and  to  avoid  the 
difficulty  of  ascertaining  the  relative  value  of  the  new 
and  old  materials  ;  but  there  would  be  less  difficulty 
in  ascertaining  this,  than  there  would  be  to  settle  the 
various  usages,  that  might  spring  up  in  different  ports, 
if  every  local  usage  were  allowed  to  control  the  prin¬ 
ciples  of  law.  In  Boston  the  one  third  new  for  old 
might  be  deducted  from  the  gross  expenses  of  repair  ; 
in  Salem  the  proceeds  of  the  old  materials  might  be 
first  deducted  ;  and  in  some  other  port  some  other 
modification  might  be  introduced,  either  by  increas¬ 
ing  or  diminishing  the  rate  of  deduction,  so  that  we 
might  have  as  many  different  usages  and  laws  as 
there  are  ports  in  the  Commonwealth.  Instead, 
therefore  of  having  a  simple  certain  and  convenient 
rule  for  our  guide,  we  should  have  to  consult  and 
ascertain  these  local  usages  ;  and  to  conform  to  the 
various  changes  and  fluctuations  in  them  which  cir¬ 
cumstances  might  from  time  to  time  introduce. — 
These  local  usages  may  be  useful,  and  are  admitted, 


8 


to  explain  the  intention  of  parties,  where  there  is 
reason  to  presume  that  the  contract  was  made  in  re¬ 
ference  to  them,  but  to  suffer  them  to  prevail  so  as 
to  sap  the  foundation  of  a  well  established  rule  ofl  aw 
would  be  going  too  far.  In  the  present  case  how 
ever,  it  is  not  necessary  to  determine  how  far  par¬ 
ticular  usages  may  be  binding,  or  explanatory  of  con¬ 
tracts,  or  of  the  rules  of  damages;  it  is  sufficient  to 
decide,  that  they  can  can  have  no  effect  upon  any 
contract,  unless  by  the  consent  of  the  contracting 
parties,  either  express  or  implied.  No  such  contract 
appears  in  this  case,  and  it  cannot  be  presumed,  for 
the  reasons  already  stated  ;  and  this  seems  to  be 
decisive  as  to  the  question  of  usage. 

The  remaining  question  is  more  important  and 
more  involved  in  doubt  and  difficulty.  The  argu¬ 
ments  and  opinions  opposed  to  the  decisions  in  Byrnes 
v.  National  Ins.  Co.  1.  Cowen,  265  and  Brooks 
v.  Oriental  Ins.  Co.  7  Pick.  259,  which  have  been 
recently  published,  are  undoubtedly  entitled  to  great 
consideration  ;  still  however  we  continue  to  think 
that  those  decisions  are  sustained  by  the  most  weighty 
and  convincing  reasons. 

All  agree  that  the  contract  of  insurance  is  one  of 
indemnity,  and  that  this  is  in  truth  the  essence  of  the 
contract.  The  assured  are  entitled  to  a  full  indem¬ 
nity  from  the  underwriters  and  nothing  more.  That 
rule  therefore  is  the  best,  which  will  in  the  settle¬ 
ment  of  a  loss  most  fully  and  exactly  fulfil  this  prin¬ 
cipal  intention  of  the  contract.  It  is  also  admitted, 
that  the  rule  of  deducting  one  third  new  for  old, 
however  construed,  will  not  always  secure  an  exact 
indemnity.  The  assured  will  recover  more  or  less 
than  an  indemnity  according  to  the  age  and  state  of 
the  vessel  before  the  loss,  but  this  imperfection  of 


9 


the  rule  is  supposed  to  be  more  than  compensated  by 
its  certainty,  simplicity  and  practical  convenience. 
Before  the  introduction  of  the  rule,  the  relative  value 
of  the  new  and  old  materials  was  ascertained  by  ap¬ 
praisement  in  each  case  ;  and  the  difference  between 
the  cost  of  the  new  materials  and  work,  and  the  value 
of  the  old  materials  at  the  time  of  the  loss,  was  de¬ 
ducted,  leaving  the  balance  for  which  the  insurer 
was  liable.  This  being  found  inconvenient,  and  it 
being  difficult  to  ascertain  the  value  of  the  old 
materials  with  accuracy,  the  rule  of  deducting  one 
third  new  for  old  was  long  since  substituted  for  the 
ancient  mode  of  adjustment,  and  its  continuance  for 
such  a  length  of  time  proves  its  practical  utility. — ■ 
Since  the  introduction  of  the  rule,  neither  party  can 
question  the  relative  value  of  the  new  and  old  mate¬ 
rials,  whether  the  rule  in  a  particular  case  should 
afford  an  exact  indemnity  or  not.  Thus  far  the  par¬ 
ties  are  bound  by  the  rule,  but  no  further.  This, 
like  all  other  general  rules,  when  applied  to  a  multi¬ 
plicity  of  cases,  will  not  always  do  exact  justice,  but 
it  should  be  so  applied  as  to  do  as  little  injustice  as 
possible.  It  will  not  do  to  say,  that  because  a  rule 
of  necessity  produces  some  unjust  results  in  particu¬ 
lar  cases,  it  should  be  so  applied  as  to  produce  other 
similar  results  without  necessity  ;  and  that  such  must 
be  the  effect  of  the  rale  contended  for  by  the  de¬ 
fendant’s  counsel,  cannot,  we  think,  well  be  doubted. 

Let  us  suppose,  for  example,  that  the  vessel  parts 
her  cable  in  a  storm,  but  that  a  part  is  saved  which 
is  sold  for  $200,  and  that  a  new  cable  is  purchased 
which  costs  $300.  If  one  third  is  deducted  from 
the  full  price  of  the  new  cable,  this  balances  the  ac¬ 
count,  and  the  assured  is  entitled  to  no  indemnity. 
If  the  part  of  the  old  cable  saved  should  sell  fcr  $250 


2 


10 


the  assured  in  stating  an  account  would  become  in¬ 
debted  to  the  underwriter  $50.  And  so  whenever 
the  old  materials  sell  for  more  than  two-thirds  ol  the 
amount  of  the  expenses  of  repairs,  a  balance  will  be 
found  in  favor  of  the  underwriter.  Whether  he  can 
claim  it  or  not,  is  not  the  question  ;  nor  is  it  any  good 
answer  to  the  objection  resulting  from  the  unjust 
operation  of  the  rule,  to  say  that  such  cases  w  ill  but 
rarely  occur  ;  for  a  result  so  unjust,  and  so  manifestly 
opposed  to  the  spirit  of  the  contract  of  insurance, 
ought  never  to  occur.  But  without  supposing  ex¬ 
treme  cases,  it  seems  to  me  that  generally  the  as¬ 
sured  will  not  receive  full  indemnity,  if  a  third  new 
for  old  is  to  be  deducted  from  the  whole  expenses  of 
repairs,  without  first  deducting  the  salvage.  The 
salvage  is  no  part  of  the  loss,  and  belongs  to  the  as¬ 
sured  ;  the  amount  of  that,  therefore,  ought  to  be 
withdrawn  from  the  operation  of  the  rule,  or  the 
assured  will  fail  to  recover  a  full  indemnity.  It 
is  said  that  the  assured,  by  such  a  rule,  would 
recover  more  than  an  indemnity,  and  that  injus¬ 
tice  would  be  done  to  the  underwriter.  For  in¬ 
stance  if  the  expenses  of  repairs  amount  to  $600, 
and  the  old  materials  sell  for  $200,  then  it  is 
said,  the  assured  would  be  fully  indemnified  by  the 
recovery  of  $200,  the  increased  value  by  the  new 
materials  being  $200,  as  assumed  by  the  rule ; 
whereas  by  first  deducting  the  proceeds  of  the  old 
materials,  and  then  deducting  one-third  from  the  res¬ 
idue,  the  assured  would  recover  $266  67,  being 
$66  67  more  than  a  full  indemnity.  But  there  is  a 
fallacy,  we  think  in  this  objection  and  statement. 

It  is  true  that  the  vessel  is  made  better  by  the  re¬ 
pairs  ;  but  it  by  no  means  follotvs,  that  the  whole 
amount  of  the  increased  value  is  to  be  credited  to 


11 


the  underwriter.  So  far  as  he  contributes  to  the  ex¬ 
penses  of  repairs  he  should  be  credited  for  the  in¬ 
creased  value,  but,  no  further.  Now  the  underwri¬ 
ter  has  no  concern  with  the  expenses  of  repairs  which 
are  defrayed  by  the  old  materials.  So  far  as  these 
go,  the  subject  repairs  itself,  and  thus  far  there  is  no 
claim  for  indemnity.  The  further  disbursements  re¬ 
quired  to  repair  the  loss,  are  to  be  made  at  the  ex¬ 
pense  of  the  underwriter,  and  on  these  expenses  he 
is  entitled  to  a  deduction  of  one-third  ;  but  there 
seems  to  be  no  good  reason  for  extending  the  rule 
beyond  these  limits. 

In  the  case  last  supposed  the  adjustment  would  be 
thus  stated. 

Whole  expenses  of  repairs  -  $600  00 

Deduct  expenses  paid  by  the  proceeds 
of  the  old  materials  those  being  the 
property  of  the  assured  -  200  00 

400  00 

The  remaining  disbursements  being 
made  at  the  expense  of  the  under¬ 
writer,  he  is  entitled  to  a  deduction 
of  one-third  new  for  old,  -  133  33 


266  67 

And  he  is  chargeable  with  the  sum  of  $266  67  ; 
which  gives  generally  to  the  assured  a  full  indemnity 
and  no  more.  There  may  be  some  exceptions  ;  but 
in  adopting  a  general  rule  of  decision  we  are  to  look 
at  general  results. 

But  it  is  denied  that  the  old  materials  are  the 
property  of  the  assured  ;  it  is  however  difficult  to 
conceive  how  and  when,  before  the  adjustment  of 
the  loss,  the  property  in  the  assured  becomes  devested 


12 

and  vested  in  the  underwriter.  It  is  said  that  if  the 
underwriter  pays  the  full  amount  of  the  loss,  the  old 
materials  become  his  property  ;  that  if  a  cable  is  lost, 
and  afterwards  the  loss  is  adjusted  and  the  under¬ 
writer  pays,  the  old  cable  if  recovered  would  become 
the  property  of  the  underwriter.  And  so  if  part  of 
the  cargo  is  lost,  and  the  loss  is  paid  by  the  assurer, 
the  lost  articles  if  recovered  would  belong  to  him. — 
This  may  well  be  admitted,  without  affecting  the 
question  under  consideration,  for  until  an  adjustment 
is  made,  the  old  materials  continue  to  belong  to  the 
assured,  and  if  they  are  disposed  of,  and  the  proceeds 
are  applied  to  the  purchase  of  new  materials,  the 
underwriter,  as  to  that  part  of  the  expenses  of  the 
repairs,  can  have  no  claim  to  an  allowance  for  the 
increased  value.  The  repairs  made  by  means  of  the 
salvage  constitute  no  part  of  the  loss,  and  cannot  be 
charged  against  the  insurer  ;  the  old  materials  there¬ 
fore  clearly  belong  to  the  assured. 

But  a  weightier  objection  to  our  former  decision 
remains  to  be  considered.  It  is  said  to  be  immate¬ 
rial,  to  whom  the  old  materials  belong,  or  who  pays 
the  disbursements  for  repairs,  because  at  all  events 
the  ship  is  made  one-third  better  by  the  repairs,  and 
therefore  that  one-third  of  the  gross  expenses  should 
be  deducted  or  the  assured  will  receive  more  than  an 
indemnity.  And  this  would  be  true,  if  the  fact  were 
that  such  would  be  in  all  cases  the  increased  value, 
or  if  the  presumption  is  to  be  carried  to  the  extent 
the  objection  supposes.  But  presumptions  against 
facts,  established  for  convenience,  are  to  be  strictly 
guarded,  and  a  rule  founded  upon  such  presumptions 
is  to  be  confined  to  the  purposes  for  which  it  is  adop¬ 
ted.  Now  it  has  been  already  remarked  that  the 
rule  in  question  was  adopted  to  avoid  the  difficulty 


13 


and  uncertainty  of  ascertaining  the  loss,  and 
the  amount  of  indemnity  therefor,  by  apprais- 
ment  in  each  particular  case.  This  rule  was  founded 
on  the  supposition  or  presumption,  that  generally  the 
new  materials  are  one-third  better  than  the  old. — ■ 
The  question  then  is  how  far  this  presumption  is  to 
be  carried  out,  and  to  ivhat  portion  of  the  repairs 
the  rule  is  to  be  applied.  We  understand  the  rule 
to  be,  that  one-third  is  to  be  deducted  from  the  ex¬ 
penses  of  repairing  the  loss,  and  that  the  loss  is  the 
injury  done  to  the  vessel  which  remains  after  the 
proceeds  of  the  old  materials  have  been  applied. — 
This  is  the  loss  against  which  the  underwriter  stipu¬ 
lates  to  indemnify  the  assured,  and  so  it  was  con¬ 
sidered  before  the  introduction  of  the  existing  rule. 
1  Magens,  193.  The  rule,  therefore,  and  the  pre¬ 
sumption  as  to  the  relative  value  of  the  materials, 
are  to  be  confined  to  the  portion  of  the  repairs  re¬ 
maining  after  crediting  the  old  materials.  These  go 
to  reduce  the  cost  of  repairs,  the  underwriter  being 
only  chargeable  with  the  difference  between  the 
proceeds  of  the  old  materials  and  the  cost  of  the 
new,  and  the  amount  of  the  difference  is  the  amount 
paid  to  repair  the  loss,  on  which  the  deduction  of 
one-third  new  for  old  is  to  be  made. 

This  on  the  whole  as  we  think,  is  much  the  most 
equitable  rule  of  adjustment,  and  best  adapted  to 
secure,  as  nearly  as  any  general  rule  can,  exact  in¬ 
demnity  ;  and  that  commonly  it  will  not  be  found 
too  favorable  to  the  assured.  Whereas  the  rule  con¬ 
tended  for  by  the  defendants  might  lead  to  injus¬ 
tice  and  even  absurdity  ;  or  to  a  train  of  exceptions 
which  might  be  very  embarrassing. 

Judgment  for  the  plaintiff. 

BOSTON,  July  20th  1833. 


%  I  I 

**  *ln  -  .  v  p  H  :?<  «i 


^  J 

4-  ji  " 


»ji *%■■>«+ t:~*  vc 

»*V- 


As  the  decision  of  the  case  of  Brooks  vs.  the  Orien¬ 
tal  Insurance  Company,  prescribed  a  new  rule  for  the 
adjustment  of  partial  losses  on  ships  with  salvage  ;  as 
existing — executory  contracts  to  a  vast  amount,  would 
be  materially  affected  by  this  rule  ;  as  the  former 
rule  had  long  been  established,  and  was,  till  recently, 
in  New  York,  in  universal  practice, — and  known  and 
acknowledged  by  the  parties  to  those  contracts  at 
the  time  they  were  made  ;  as  the  old  rule  was  be¬ 
lieved  to  be  right,  and  the  new  rule  to  be  wrong, — 
these  several  considerations  produced  an  impression, 
that  the  decision  was  not  the  result  of  full  discussion, 
and  mature  deliberation.  The  importance  of  the 
question  rendered  a  re-consideration  of  that  decis¬ 
ion  a  very  desirable  object  to  the  several  insurance 
companies  in  Boston,  as  it  was  generally  maintained 
by  them,  that  the  decision  wTas  not  only  wrrong  in 
itself ;  but,  if  otherwise,  it  did  not  affect  the  con¬ 
tracts,  made  under  their  form  of  policies,  because 
these  contained  a  provision,  which  that ,  on  which 
the  decision  was  made,  did  not ;  and  which,  they 
conceived,  exempted  them  from  the  operation  of  the 
rule.  That  provision  follows  an  enumeration  of  the 
several  perils  assumed  by  the  insurer,  and  is  in  these 
words,  “  and  all  other  losses  and  misfortunes  which 
have,  or  shall  come  to  the  damage  of  the  said  ship, 
or  any  part  thereof,  to  which  insurers  are  liable  by 
the  rules  and  customs  of  insurance  in  Boston.” 


16 


Under  this  form  of  policy,  the  Atlas  Insurance 
Company  insured  one  half  of  the  ship  Grecian,  owned 
by  William  Eager.  The  policy  was  made  prior  to 
the  decision  of  the  Court  in  the  case  before  mention¬ 
ed.  The  ship,  while  thus  insured,  sustained  dam¬ 
age  in  her  bottom,  by  which  it  became  necessary  to 
strip  off  the  old  copper  and  to  substitute  new.  The 
loss  having  occurred  subsequently  to  that  decision,  a 
claim  was  made  on  the  principle  of  the  rule  therein 
prescribed. 

The  insurers  of  the  ship  refused  to  settle  upon 
that  principle  ;  but  proposed  to  adjust  the  loss  in  the 
customary  mode,  and  to  give  an  obligation  to  pay 
the  owner  of  her,  the  difference  between  the  two 
modes  of  adjustment,  if  the  Court,  on  a  re-con¬ 
sideration  of  the  question,  should  confirm  their  for¬ 
mer  opinion,  and  decide,  that  the  insurers,  under 
their  form  of  policy,  were  not  exempted  from  the 
operation  of  the  rule. 

An  adjustment  was  accordingly  made  agreeably  to 
the  general  usage.  One-third  was  deducted  from  the 
value  of  the  new  materials  and  labor,  and  the  proceeds 
of  the  old  materials  were  credited  to  the  insurers. 
Under  this  form  of  adjustment  the  net  amount  of 

loss  was  -  -  -  $1418  00 

Under  the  new  form  it  amounted  to  -  1871  74 

Making  under  the  two  forms,  a  difference  of  $453  74 

For  this  difference,  obligations  as  before  stated, 
were  given  by  the  Columbian  Insurance  Company 
for  one  half,  and  by  the  Atlas  Insurance  Company 
for  the  other — one  half  of  the  ship  being  insured  by 
each  company.  For  this  proportion  an  action  was 
commenced  against  the  lasCnamed  company  in  the 
Supreme  Judicial  Court  of  Massachusetts.  It  was 


17 


agreed  by  the  parties,  that,  at  the  time  of  under¬ 
writing  the  policy^,  and  at  the  time  of  the  loss,  it  was 
the  usage  of  the  insurance  companies  then  existing 
in  Boston  to  adjust  losses  of  this  nature  by  the  mode 
contended  for  by  the  defendants. 

The  defendants  contended,  that  the  rule  of  ad¬ 
justment  established  in  Boston,  was  the  rule  used 
and  established  in  all  other  places  in  the  commercial 
world,  except  New  York  ;  that  the  contract  of  insur¬ 
ance  being  one  of  indemnity,  the  rule  established  in  the 
case  of  Brooks  vs.  the  Oriental  Insurance  Company, 
was  contrary  to  the  law  of  insurance,  because  the 
insured  wrnuld  obtain  by  it,  more  than  an  indemnity; 
that  the  rule  being  repugnant  to  the  rules  and  cus¬ 
toms  of  insurance  in  Boston,  they  were  not  liable 
to  its  operation  under  their  form  of  policy. 

The  facts  in  the  case  being  admitted,  it  was  sub¬ 
mitted  to  the  Court  for  judgment  on  the  law.  The 
Court  in  giving  their  opinion  also  admitted  : 

1st.  That  a  local  usage ,  as  w7ell  as  general  usages 
of  trade  may  materially  affect  the  construction 
of  a  contract ;  but,  to  have  this  effect,  such  usage  must 
appear  to  be  so  well  settled,  and  of  so  long  a  contin¬ 
uance,  as  to  raise  a  fair  presumption,  that  it  was 
known  to  both  contracting  parties,  and  that  the  con¬ 
tract  was  made  in  reference  to  it: 

2dly.  That,  the  contract  of  insurance  is  one  of  in¬ 
demnity,  which  is  its  essence  ;  and,  that  the  insured 
are  entitled  to  a  full  indemnity  from  the  underwriters, 
and  nothing  more  : 

3dly.  That  deducting  one-third  new  for  old  is  a 
rule  of  law,  long  since  introduced,  and  of  practical 
utility:  And  the  court  maintained: 

That,  in  case  of  repairs  to  a  ship  the  old  materials, 
for  which  new  have  been  substituted,  belong  to  the  in- 

3 


18 


sured  until  the  loss  is  adjusted  ;  that  the  value  or 
proceeds  of  those  materials,  must  be  deducted  from 
the  gross  amount  of  the  repairs,  and  the  difference 
is  the  loss,  to  which  the  rule  of  deducting  one-third 
new  for  old  is  to  be  applied. 

The  decision  of  the  Court  was  for  the  plaintiffs ; 
and  the  principles  and  opinions  on  which  that  decis¬ 
ion  rests,  and  the  reasonings  which  led  to  it,  we  pro¬ 
pose  to  examine. 

In  executing  this  intention,  we  shall  speak  of  the 
opinions  of  the  Court  with  respect,  but  with  free¬ 
dom.  Their  opinions  will  be  treated  according  to 
their  intrinsic  worth  ;  not  according  to  a  value  de¬ 
rived  only  from  official  authority.  We  know  not 
why  Judicial  opinions  should  not  be  subject  to  ex¬ 
amination,  as  well  as  others  of  public  interest.  The 
Supreme  Judicial  Court  is  not  an  infallible  tribunal. 
Their  decisions  are  received  as  law,  and,  when  pro¬ 
claimed,  are  rules  of  action  for  the  community.  From 
those  decisions  there  is  no  appeal.  If  they  are  wrong, 
the  effects  upon  the  people  will  be  mischievous.  The 
Judges  are,  and  ought  to  be,  independent  in  their 
salaries,  and  their  stations.  Thus  situated,  we  have 
a  right  to  expect,  that  their  opinions  will  be  the  re¬ 
sult  of  the  most  patient  investigation  of  facts  and  a 
sincere  desire  to  ascertain  the  truth  and  to  establish 
sound  rules  of  law  for  the  administration  of  justice — 
that  prejudice,  passion  and  an  ad  Iterance  to  former 
opinions,  merely  because  they  have  once  been  pro¬ 
claimed,  will  have  no  influence  in  their  determina¬ 
tions.  The  decisions  of  our  Courts  of  Law  deeply 
concern  the  public.  They  operate  on  life,  lib¬ 
erty  and  property.  They  are  acts  of  public  agents, 
and,  as  such,  are  subjects  on  which  the  public  have  a 
right,  whenever  they  please,  to  express  and  publish 


19 


their  sentiments.  A  judicious,  impartial  and  learn¬ 
ed  tribunal  has  nothing  to  apprehend  from  a  public 
examination  of  its  acts.  Sound  opinions  will  bear 
handling  :  and  the  discussion  of  those  of  the  judiciary, 
so  long  as  it  is  conducted  with  temperance  and  pro¬ 
priety,  will  be  productive  of  good,  not  of  evil. 

The  first  point  considered  by  the  Court  was  that  contended  for 
of  usage.  The  usage  contended  for  by  the  defend-  g “»«•«/> 
ants,  was  not  whether  a  third  new  for  old  should  be 
deducted  ;  but  whether  it  was  the  usage  to  make  the 
deduction  for  wear  and  tear  from  the  gross  amount  of 
repairs.  This  the  Court  considered  and  treated  as  a 
local  usage.  Although  the  rules  and  customs  of  in¬ 
surance  in  Boston,  are  expressly  referred  to  in  the 
policy ;  yet,  so  far  as  those  rules  and  customs  agree 
with  the  rules  and  customs  of  other  commercial 
states  and  nations,  they  are  not  local.  Whether  the 
usage  contended  for  by  the  Defendants  was  or  was 
not  a  local  usage ,  should,  if  the  fact  were  essential 
in  the  case,  have  been  ascertained ,  not  assumed.  If 
the  Court  had  investigated  the  subject,  they  would 
have  discovered,  that  it  was  not  a  local ,  but  a  gener¬ 
al  usage — an  usage  not  peculiar  to  Boston,  but  com¬ 
mon  to  the  whole  commercial  world,  except  New 
York;  whose  example,  in  this  case,  appears  to  have 
been  followed,  without  duly  considering  the  results 
to  which  it  leads.  If  proofs  of  the  fact  had  been  re¬ 
quired,  proofs  could  have  been  adduced.  If  authori¬ 
ties  were  wanted,  the  books  furnish  them.  But  that 
the  Court  labored  under  some  misapprehension  as  to 
the  matter  in  question,  is  apparent  from  the  fact,  that 
the  citation  made  by  them  from  Magens  I.  p.  193. 
is  directly  opposed  to  the  doctrine  they  have  here  ad¬ 
vanced,  as  well  as  to  that,  for  the  support  of  which 
it  was  adduced.  The  question,  or  the  quotation 


20 


and  long  cs* 
tablished. 


The  usage 
was  known  lo 
the  parties  to 
the  contract  & 
the  contract 
was  made  in 
reference  to 
it. 


Local  usages 
have  the  force 
of  law  where 
they  prevail, 
&c. 


must  have  been  misunderstood  !  For,  by  this  very  au¬ 
thority,  quoted  by  the  Court  themselves,  it  appears, 
that  the  usage  contended  for  by  the  defendants,  was 
the  usage  nearly  a  century  ago — that  the  only  differ¬ 
ence  in  the  mode  of  adjustment  then ,  and  that  now 
practiced  here,  is,  that  the  value  of  the  old  materials 
lost  was  then  ascertained  by  appraisement,  but  is 
now  established  and  admitted  in  all  cases,  to  be  two 
thirds  of  the  original  cost :  But,  from  the  value  thus 
deduced,  it  was  the  usage  then  as  now  to  deduct 
the  value,  or  proceeds  of  the  old  materials.  Thus 
the  authority  quoted  establishes  two  points  at  once : 
1st.  that  the  usage  contended  for  by  the  Defendants 
is  not  a  mere  local  usage ;  and  2dly.  that  it  is  a  usage 
oj  long  continuance.  The  Court,  therefore,  in  con¬ 
sidering  and  treating  it  as  a  local  usage ,  have  mista¬ 
ken  the  fact. 

We  have  shown,  that  the  usage  in  question  is  not 
local ;  and  we  will  next  show,  that  it  was  known  to 
the  parties ;  and  that  the  contract  was  made  in  refer¬ 
ence  to  it.  “  Besides  the  general  law  of  merchants, 
there  are  certain  usages  which  prevail  in  particular 
countries,  and  sometimes  in  particular  branches  of 
commerce.  These,  like  local  customs  in  England, 
have  the  force  of  law  where  they  prevail;  and  where 
they  are  in  force,  are  always  supposed  to  be  in  the 
contemplation  of  the  parties  ;  and  the  contract  of  in¬ 
surance  is  construed  as  having  been  made  with  ref¬ 
erence  to  them.  But  then  they  must  appear  to  have 
been  long  established  ;  that  is,  as  I  humbly  appre¬ 
hend,  they  must  be  immemorial,  or  at  least  coeval 
with  the  branch  of  commerce  to  which  they  be¬ 
long.”* 


’Marshall  on  Ins.  Intro,  p.  19. 


21 


Here  we  have  authority  to  show,  that  a  local  cus¬ 
tom  long  established  has  the  force  of  law  where  it 
prevails;  and,  where  it  is  in  force,  is  always  supposed 
to  be  in  the  contemplation  of  the  parties ,  and  the 
contract  of  insurance  is  construed  as  having  been 
made  in  reference  to  it.  What  ground,  then,  had  the 
Court  for  asserting,  that  there  was  no  proof,  nor 
ground  of  presumption,  that  the  usage  contended  for, 
was  adopted  by  the  parties ;  nor  that  the  contract  was 
made  in  reference  to  it?  Is  it  no  proof,  that  such  a 
rule  of  settlement  had  existed  for  nearly  a  century  ? 
Is  it  no  proof,  when  the  usage  is  general  and  long  es¬ 
tablished?  Is  it  no  proof,  when  the  books  lay  it  down 
as  the  rule  of  adjustment?  Is  it  no  proof,  when 
such  a  mode  of  adjustment  as  that  for  which  the 
Plaintiffs  contend,  could  not,  at  the  time  of  making 
the  contract,  be  found  on  the  records  of  any  insur¬ 
ance  company  in  the  Commonwealth  ?  If  this  be 
no  proof  that  the  Plaintiff's  knew  of  such  an  usage, 
and  that  the  contract  was  made  in  reference  to  it,  is 
it  no  ground  of  presumption  that  they  knew  it  ? 

How  strange  too  does  it  appear,  that  in  the  page 
next  but  one  preceding,  the  Court  say  :  “  It  is  agreed 
by  the  parties,  that  at  the  tune  of  underwriting  the 
policy ,  and  at  the  time  of  the  loss,  it  ivas  the  usage  of 
the  insurance  offices,  then  existing  in  Boston  in  ad¬ 
justing  a  partml  loss,  to  deduct  one  third  for  new 
from  the  gross  amount  of  the  expenses  of  repairs 
Here  is  an  admission,  that  the  usage  ivas  adopted  by 
the  parties,  and  that  the  contract  ivas  made  in  reference 
to  it,  of  which  the  Court  say,  “  there  is  no  proof, 
nor  ground  of  presumption — How  the  decision  of 
the  Court  can  be  reconciled  with  the  facts  and  the 
doctrine,  is  a  question,  we  imagine,  of  difficult  solu¬ 
tion. 


22 


The  policy 
has  refer  ence 
lo  such  usage. 


The  insurers 
not  liable  f«>r  a 
loss  created 
only  by  a 
mode  of  ad¬ 
justment  re¬ 
pugnant  to 
usage. 


The  Court  then  proceed,  and  decide,  that  the 
clause  in  question  was  introduced,  “  for  the  purpose 
of  designating  the  perils  insured  against,  and  of  sup¬ 
plying  any  omission  in  the  list  of  those,  which  are 
enumerated  ;  but  it  has  no  relation  to  the  mode  of 
adjusting  a  partial  loss.” 

What  is  the  language  of  the  policy  ?  It  is  this. 
“  And  all  other  losses  and  misfortunes ,  which  have, 
or  shall  come  to  the  damage  of  the  said  ship  to  which 
insurers  are  liable  by  the  rules  and  customs  of  insur¬ 
ance  in  Boston.”  The  phraseology  we  will  not  de¬ 
fend.  The  Court  have  considered  perils  and  losses 
as  synonymous  terms  ;  and  so  too,  we  presume,  the 
word  misfortune  must,  in  this  connexion,  be  consid¬ 
ered.  The  policy,  therefore,  enumerates  certain 
losses  which  the  insurers  are  to  bear  ;  and  then  adds, 
certain  other  losses  not  enumerated,  but  which  are 
restricted  to  those,  to  which  “  insurers  are  liable  by 
the  rules  and  customs  of  insurance  in  Boston .” 

The  policy  proceeds  farther — It  contains  a  provi¬ 
so,  that  the  insurers  “  shall  not  be  liable  for  any  par¬ 
tial  loss  on  the  ship,”  “  unless  it  amount  to  five  per 
cent.”  The  loss,  in  this  case,  the  Court  considered 
as  a  partial  loss.  Now,  in  many  cases,  a  loss  or 
damage  to  the  ship  would  not  amount  to  five  per 
cent,  if  adjusted  according  to  the  rules  and  customs 
of  insurance  in  Boston ;  but  would  amount  to  five 
per  cent,  if  adjusted  according  to  the  rules  and  cus¬ 
toms  of  insurance  in  New  York.  Can,  then,  the  loss¬ 
es  that  are  made  so  for  the  insured  by  an  adjustment 
by  the  rules  and  customs  of  New  York,  be  the  losses 
which  are  meant  in  the  policy,  as  those  to  which  in¬ 
surers  are  liable  by  the  rules  and  customs  of  Boston? 
When  the  mode  of  adjustment  determines,  whether 
a  claim  for  damage  be  a  loss  or  not  a  loss,  within 


23 


the  meaning  of  the  policy,  the  words  must  have  been 
evidently  introduced,  not  “  for  the  purpose  of  desig¬ 
nating  the  perils  insured  against,”  but.  for  the  pur¬ 
pose  of  proclaiming,  that  they  assumed  no  other 
losses,  than  those  to  which  insurers  were  liable  by 
the  rules  and  customs  of  Boston.  The  words,  there¬ 
fore,  instead  of  having  “  no  relation,”  have  a  very 
near  relation  “  to  the  mode  of  adjusting  a  partial 
loss,” — the  relation  of  cause  and  effect :  for,  if  the 
rules  and  customs  of  Boston  have  no  relation  to  the 
mode  of  adjusting  a  loss,  it  has  been  shown,  that  the 
insurers  would  be  subjected  to  losses,  which  they 
never  assumed ,  nor  were  contemplated  by  the  parties 
to  the  contract,  at  the  time  it  was  made.  We  have 
thus  shown, 

1st.  That  the  usage  contended  for  by  the  Defend¬ 
ants  is  not  a  local ,  but  a  general  usage  : 

2dly.  That  the  usage  has  been  long  established, 
and  was  known  and  adopted  by  the  parties  to  the 
contract,  which  was  made  in  reference  to  it : 

3dly.  That  local  usages,  in  such  circumstances, 
have  the  force  of  law,  and  bind  the  parties  : 

4thly.  That  the  policy  has  reference  to  those 
usages,  as  they  relate  to  the  mode  of  adjusting  loss¬ 
es  : 

Therefore,  from  the  principles  and  doctrines  laid 
down  by  the  Court  themselves,  the  defendants  were 
not  liable  under  their  form  of  policy  for  the  claim 
made  upon  them. 

The  Court,  having  decided  the  question  of  usage, 
proceed  to  consider  the  question  of  indemnity  under 
the  rule  established  in  the  case  of  Brooks  vs.  the 
Oriental  Insurance  Company.  The  Court  maintain¬ 
ed,  that,  by  this  rule,  the  insured  would,  in  all  cases, 
of  partial  loss  on  the  ship,  receive  an  indemnity  ;  but 


by  tliat  contended  for  by  the  defendants,  and  which 
had  been  nearly  a  cent.  :y  in  operation,  the  insured 
never  would  receive  an  indemnity.  The  Defendants 
maintained,  that,  in  ah  such  cases,  the  insured  would 
receive  more  than  an  indemnity  on  adjustments  bv 
the  new  rule  ;  but  never  more ,  nor  less,  under  the  old 
rule.  The  Court  admitted, 

_  .  1st.  That  the  rule  of  deducting;  one  third  new  for 

Deducting  O 

ronreoidrad  weiil old  is  a  well  settled  principle  of  law  : 

wb  2dly.  That  the  contract  of  insurance  is  one  of  in- 

Indemnity  J 

ofrlie contract  demnity,  which  is  its  essence. 

t,‘  1 U1  "cr  The  premises  are  admitted — they  are  indisputable. 
Taking  these  as  our  points  of  departure,  we  arrived 
at  very  different  conclusions  from  those  of  the  Court. 
When  we  are  satisfied  our  opinions  on  any  subject 
are  erroneous,  we  shall  abandon  them  ;  but  while  we 
are  satisfied  they  are  correct,  we  will  cling  to  them. 
An  adherance  to  error  from  pride  of  opinion  is  ob¬ 
stinacy,  not  wisdom.  We  were  ready  and  willing  to 
relinquish  our  opinions,  if  they  could  be  proved  to  be 
erroneous.  Having  a  desire  to  know  all  that  could 
be  said  upon  the  question  by  the  highest  judicial  au¬ 
thority,  we  waited,  with  some  impatience,  for  the 
opinion  of  the  Court.  Our  curiosity  was  excited  to 
learn,  how  it  could  be  proved,  that  insurers,  in  their 
mode  of  adjusting  partial  losses  on  ships,  had  so  long 
deluded,  or  imposed  upon  the  insured  by  a  misappli¬ 
cation  of  two  rules,  so  simple  in  their  nature,  and  the 
correct  application  of  which  is  an  operation  of  com¬ 
mon  arithmetic,  and  requires  no  further  advances  in 
the  science  of  figures,  than  to  the  Golden  Rule  of 
Proportion:  and,  how  the  insured,  who  generally 
understand  so  well  how  to  work  by  that  Golden 
Rule ,  should,  from  generation  to  generation,  have 
been  subjected  to  an  erroneous  mode  of  adjusting 


25 


losses  ;  with  too  little  sagacity  to  discover  a  practi¬ 
cal  error,  acting  injuriously  upon  their  own  interests . 

Having  obtained  the  opinion,  we  retraced  the  steps 
by  which  we  had  come  to  our  conclusions,  and  fol¬ 
lowed  those  of  the  Court  by  which  they  came  to 
theirs  ;  but  without  discovering  either  our  own  errors 
or  their  correctness. 

The  Court  say,  that  “The  usage”  (that  is  deduct¬ 
ing  one  third  from  the  gross  amount  of  the  repairs) 

“  relied  upon  by  the  defendants,  is  opposed  to  the 
essence  of  the  contract  of  insurance  which  is  a  con¬ 
tract  of  indemnity.” 

Now,  if  this  assertion  be  true  it  is  susceptible  of 
proof ;  and  if  it  is  not  proved,  we  may  presume  it  is 
because  it  is  not  true  ;  and,  therefore,  not  suscepti¬ 
ble  of  proof.  If  it  be  proved,  we  admit  it  settles  the 
question,  and  there  is  an  end  to  the  whole  ^matter. 

What  then  is  the  proof  ? 

Deducting  one  third  new  for  old,  the  Court  have 
laid  down  as  a  rule  of  law  ;  consequently,  when  the 
insured,  in  case  of  loss,  receives  two  thirds  of  the 
original  value  of  wrhat  has  been  lost,  he  is,  by  law, 
fully  indemnified. 

It  is  also  admitted  by  the  Court,  “  that  the  rule  of  The  new  rule 

J  violates  bo£h 

deducting  one  third  new  for  old,  however  construed,  princi‘ 
will  not  always  secure  an  exact  indemnity.  The 
assured  will  recover  more  or  less  than  an  indemnity 
according  to  the  age  and  state  of  the  vessel  before  the 
loss”  The  reasons  they  give  in  favor  of  the  rule 
are  old  ;  but  truth  is  not  less  valuable  for  its  age. 

;  Does  it  require  an  argument  to  prove,  that  when  a 
thing  is  new  and  received  as  one  third  worn ,  that  the 
thing  is  received  for  less  than  its  worth  ;  and  when  a 
thing  is  seven  eighths  worn,  and  is  received  for  two 
thirds  its  original  value,  that  the  thing  is  received  for 


4 


26 


more  than  it  is  worth  !  Notwithstanding  these  obvi- 
ous  truths,  and  the  labors  of  the  Court  to  prove  them 
to  others ;  yet,  they  themselves ,  have  stated  an  exam¬ 
ple  in  which,  the  thing  lost  was  not  one  third  worn, 
to  show,  that  the  insured  is  not  indemnified  when  the 
adjustment  is  made  by  the  rule  for  which  the  De¬ 
fendants  contended — thus  conflicting  against  their 
own  principles,  and  controverting  their  own  reason¬ 
ing  to  prove  the  correctness  of  those  principles.  We 
give  below  the  whole  case  supposed.  “  Let  us,” 
say  the  Court,  “  suppose,  for  example,  that  the  vessel 
parts  her  cable  in  a  storm,  but  that  a  part  is  saved  ; 
which  is  sold  for  $200,  and  that  a  new  cable  is  pur¬ 
chased  which  cost  $300.  If  one  third  is  deducted 
from  the  full  price  of  the  new  cable,  this  balances  the 
account,  and  the  assured  is  entitled  to  no  indemnity.” 

It  must  be  remembered,  that  the  Court  admitted 
the  rule  of  deducting  one  third  new  for  old  to  be  a 
well  settled  rule  of  law  ;  therefore,  if  two  thirds  the 
original  value  of  the  thing  lost  is  paid  the  insured, 
he  is  indemnified.  Now,  the  cable  when  new,  cost 
$300, — when  lost,  it  was,  by  the  law,  one  third 
worn,  and  the  loss  to  the  insured  was  therefore  only 
$200;  and,  of  course,  he  could  claim  nothing,  for  he 
had  lost  nothing. 

The  example  proceeds,  “  If  the  part  of  the  old  ca¬ 
ble  saved,  should  sell  for  $250,  the  assured,  in  stating 
an  account,  would  become  indebted  to  the  under¬ 
writer  $50 — and  so  whenever  the  old  materials  sell 
for  more  than  two  thirds  of  the  amount  of  the  expenses 
of  repairs  a  balance  will  be  found  in  favor  of  the  un¬ 
derwriter.”  This  is  contending  against  the  rule  it¬ 
self.  It  is  bringing  an  exception  which  proves,  if  it 
proves  anything,  the  unsoundness  of  the  general  rule. 
The  damaged  article  selling  for  mete  than  two  thirds 


21 


its  original  value ,  can  it  be  necessary  to  say,  was  be¬ 
cause  it  was  not  one  third  worn,  as  the  rule  consid¬ 
ered  it  ?  The  Court,  however,  on  this  supposed  ex¬ 
ample,  proceed  in  a  train  of  reasoning  on  the  injus¬ 
tice  and  repugnancy  of  this  mode  of  settlement ,  to  the 
spirit  of  the  contract ,  apparently  forgetting  their  own 
language  in  a  few  preceding  lines — “  that  the  rule,” 
(deducting  one  third  new  for  old)  “  however  constru¬ 
ed.  will  not  always  secure  an  exact  indemnity.  The 
assured  will  recover  more  or  less  than  an  indemnity 
according  to  the  age  and  state  of  the  vessel  before  the 
loss,” — and  that,  “  neither  party  can  question  the 
relative  value  of  the  new  and  old  materials ,  whether 
the  rule,  in  a  particular  case,  should  afford  an  exact 
indemnity  or  not.” 

Astonishment  has  indeed  been  excited  at  this  rea¬ 
soning  of  the  Supreme  Judicial  Court  of  Massachu¬ 
setts.  The  Court  say,  that  neither  party  can  ques¬ 
tion  the  relative  value  of  the  new  and  old  materials — 
and  they  state  an  example  in  which  the  relative  value 
is  the  only  point  in  the  question — and  then  exclaim, 
that  “  a  result  so  unjust  and  so  manifestly  opposed  to 
the  spirit  of  the  contract  of  insurance  ought  never  to 
occur!”  And  by  their  example  too,  they  affirm,  that 
“  the  assured  in  stating  an  account  would  become  in¬ 
debted  to  the  underwriter  $50 — and  so  whenever  the 
!old  materials  sell  for  more  than  two  thirds  of  the 
amount  of  the  expenses  of  repairs,  a  balance  will  be 
found  in  favor  of  the  underwriter.” 

Did  any  one  ever  know,  or  hear  of  such  an  account 
being  stated  ?  The  mind  of  the  man  who  would  make 
it  must  be  disordered  :  he  would  require  the  advice 
af  a  physician,  not  of  an  attorney  ;  the  aid  of  medi- 
zine  not  of  law.  Men  of  business  usually  state  ac- 

' 

| 


28 


counts”  and  make  claims  on  insurers,  to  show  they 
have  something  to  receive  from  them  ;  not  when  they 
sustain  no  loss  under  the  policy  to  show,  that  they 
have  something  to  pay  to  them  ! 

It  would  appear  from  the  manner  of  treating  this 
question,  that  it  had  not  two  sides.  The  Court, 
indeed,  admitted,  that  under  the  rule,  the  assured  will 
recover  more  or  less  than  an  indemnity,  according  to 
the  age  and  state  of  the  vessel  before  the  loss .” — But 
the  case,  they  state,  is  one  of  less  than  an  indemnity , 
because  the  value  of  the  thing  at  the  time  of  the  loss, 
was  greater  than  that  assumed  by  the  rule — being 
less  than  one  third  worn.  Could  not  the  Court  have 
stated  a  case  on  the  other  side,  where  the  insured 
would  recover  more  than  an  indemnity  f  If  their  sup¬ 
posed  case  against  the  insured  shows  a  result  so  un¬ 
just ,  and  so  manifestly  opposed  to  the  spirit  of  the  con¬ 
tract  as  ought  never  to  occur,  will  not  a  supposed 
case  against  the  insurer  also  show  a  result  so  unjust 
and  so  manifestly  opposed  to  the  spirit  of  the  contract 
as  ought  never  to  occur?  We  will  suppose  such  a 
case. — A  vessel  in  a  storm  slips  her  cable,  and  anoth¬ 
er  is  purchased  which  cost  $300.  The  old  cable  is 
afterwards  recovered,  and  is  worth  neither  more  nor 
less,  than  it  was  at  the  time  of  slipping  it.  The  cable 
is  sold  and  produces  but  $50,  being  five  sixths  worn. 
Now,  under  the  rule  contended  for  by  the  Defendants, 
the  following  would  be  the  mode  of  adjustment  ; 

First  cost  of  the  lost  cable,  -----  $300  • 

Less  one  third  new  for  old  -----  100 

Loss  by  the  law  under  the  contract,  -  -  -  $200 

Now  by  this  mode  of  adjustment,  the  loss  is  esti¬ 
mated  at  $200  ;  but  the  article  being  five  sixths 
worn,  the  actual  loss  is  but  $50 ;  the  difference,  i 


29 


therefore,  between  the  actual  loss  and  the  legal  loss 
is  $150,  which  sum,  being  the  excess  beyond  the  ac¬ 
tual  loss,  the  insured  is  so  much  more  than  indemni¬ 
fied.  In  the  first  case,  the  insured  receives  less  than 
he  had  lost,  because  the  thing  lost  was  worth  more 
than  two  thirds  of  its  first  cost ;  in  the  second  case, 
he  receives  more  than  he  had  lost,  because  the  thing 
was  worth  less  than  two  thirds  its  first  cost.  But 
there  is  this  difference  in  practice, — the  insurer  will, 
in  such  circumstances,  never  he  paid  the  profit ;  but 
will  always  pay  the  loss. 

Such  cases  may  be  multiplied  ;  but  they  have  no 
relation  to  the  question.  They  prove  nothing.  Their 
bearing  is  upon  the  rule  of  deducting  one  third  new 
for  old,  about  which  there  is  no  controversy. 

But  will  the  rule  of  the  Court  be  more  equal  and  The  new 

.  i  1  *  *  •  *11  •  *1  rule  of  adjust. 

equitable  m  its  operation — will  it  provide  a  more  wm 

1  1  1  always  give 

exact  indemnity  than  that  for  which  it  is  substituted 
We  answer,  no  :  it  creates  an  evil,  instead  of  remov-oidy  tl,e 

.  T  11  .  ,  neither  more 

mg  one.  In  all  cases  it  gives  more  to  the  insured,  nor  less, 
and  takes  more  from  the  insurer.  It  operates  all  on 
one  side.  When  the  thing  lost  is  less  than  two 
thirds  worn,  and  the  rule  operates  for  the  insurer, 
the  effect  of  that  favorable  operation  is  diminished ; 
and  when  the  thing  is  more  than  two  thirds  worn, 
and  the  rule  operates  against  the  insurer,  that  effect 
is  increased ;  and  as  the  insured  in  such  cases  re¬ 
ceived  more  than  an  indemnity  by  the  former  mode 


demnity,  is  still  further  increased  under  the  new 
mode.  Or,  in  other  words,  the  losses  on  one  side  of 
the  rule  are  for  one  party  augmented ;  and  the  gains 
on  the  other  side  diminished  :  While,  to  the  insur¬ 
ed,  it  is  a  gain  on  both  sides. 

Let  us  see  how  far  the  rule  of  the  Court  will  oper- 


30 


ate  in  producing  an  indemnity  more  nearly  than  the 
old  rule.  We  take  the  case  stated  by  the  Court, 
which,  they  say,  is  so  unjust  in  its  result ,  that  it 
ought  never  to  occur.  The  cable  purchased  to  re¬ 


place  the  one  lost,  cost  -------  $300 

Deduct  one  third  new  for  old  -  -  -  -  100 

Loss  under  the  policy  ------  $200 


The  old  cable  is  sold  and  the  proceeds  are  paid  to 
the  underwriters  and  amount  to  $250.  By  which 
the  insurers  receive  more  than  they  pay  $50.  This 
the  Court  say  “  it  a  result  so  unjust,  and  so  mani¬ 
festly  opposed  to  the  spirit  of  the  contract  of  insur¬ 
ance”  that  “  it  ought  never  to  occur.” 

There  can  be  no  injustice  in  executing  a  contract 
according  to  its  conditions,  and  the  mutual  under¬ 
standing  of  the  parties  at  the  time  of  making  it.  Is 
it  unjust,  if  a  ship  is  fully  insured,  is  supposed  to 
be  totally  lost,  is  abandoned,  a  total  loss  paid  ; — and 
it  appears  afterwards,  that  she  was  not  lost,  is  re¬ 
ceived  by  the  underwriters  and  sold  for  more  than 
they  paid  for  her  ?  and  so  if  goods  are  insured,  aban¬ 
doned,  and  sold  for  more  than  the  sum  for  which 
they  were  insured  ? — If  there  be  injustice  in  the  one 
case,  there  must  be  injustice  in  the  others.  But 
these  are  cases  which  very  seldom  occur  ;  and  when 
they  happen,  it  is  because  the  result  was  not  antici¬ 
pated  by  the  insured. 

But  the  true  point  of  light  in  which  to  view  this 
question  is  not,  whether  the  insurers  have  received 
more  than  they  paid  ;  but  whether,  what  the  insur¬ 
ed  has  received,  is  equivalent  to  what  he  has  lost? 
Was  the  cable  then  worth  more  than  $200  ?  By 
the  contract  it  was  not ;  if  then  he  is  paid  that  sum 
he  is  indemnified :  for  he  has  received  all  the  loss 
which  was  covered  by  the  premium. 


31 


The  salvage,  “  say  the  Court,”  is  no  part  of  the 
loss,  and  belongs  to  the  assured  ;  the  amount  of  that, 
therefore,  ought  to  be  withdrawn  from  the  operation 
of  the  rule,  or  the  assured  will  fail  to  recover  a  full 
indemnity.”  They  then  cite  a  case  stated  and  pre¬ 
sented  by  the  defendant’s  showing  that,  by  the  opera¬ 
tion  of  the  new  rule,  the  insured  would  receive  viore 
than  a  full  indemnity.  But  the  Court  add — “  there 
is  a  fallacy,  we  think,  in  the  objection  and  state¬ 
ment” — “It  is  true,”  say  they,  “  the  vessel  is  made 
better  by  the  repairs.” 

The  Court  attempt  to  prove  the  fallacy  by  stating 
the  following  case — 

“  Whole  expenses  of  repairs  -  -  600  00 

Deduct  expenses  as  paid  by  the  proceeds 
of  the  old  materials,  those  being  the 
property  of  the  assured  -  200  00 

400  00 

The  remaining  disbursements  being  made 
at  the  expense  of  the  underwriter,  he  is 
entitled  to  a  deduction  one  third  new 
for  old  -----  133  33 


$2 66  67 


and  he  is  chargeable  with  the  of  $2 66  67.” 

The  Court  had  admitted  that  “  the  vessel  is  made 
better  by  the  repairs”  and  they  admitted,  that  the  rule 
of  law  determines,  that  she  is,  by  those  repairs  ‘ made 
better ’  or  more  valuable  one  third  of  their  amount;  the 
vessel  is  therefore  bettered  0200.  But  the  insured 
receives  $200,  for  which  he  credits  only  $133  33. — 
His  loss  is  $400  ;  for  this  he  receives  $200  in  old 
materials,  and  $266  67  of  the  insurers.  Does  he 

I 

I 


32 


not  then  for  a  loss  of  $400,  receive  the  sum  of 
$466  67  ?  Now,  if  the  loss  of  a  cable  which  origin¬ 
ally  cost  $600,  will,  under  one  mode  of  adjustment, 
give  a  claim  for  $466  67  as  a  true  indemnity  ;  it  is 
evident,  that,  for  the  loss  of  the  same  thing,  less 
than  $466  67  will  not  be  an  indemnity.  Suppose 
there  was  no  salvage, — it  is  then  universally  admit¬ 
ted,  that  3400  in  money  will  be  an  indemnity.  Can 
a  loss  be  greater  with  salvage  than  without  it  ? — 
So  the  new  rule  makes  it  appear. 

It  being  admitted,  that  when  a  cable  costing  ori¬ 
ginally  $600  is  lost,  it  is  worth  but  $400  at  the  time 
of  the  loss. — Suppose  in  case  it  were  lost,  that  the 
insured,  instead  of  furnishing  a  new  cable,  were  to 
supply  an  old  one  of  similar  quality  and  value  as  the 
one  lost. — The  account  would  then  be  balanced  : 
the  insured  had  lost  one  cable  worth  $400,  and  re¬ 
ceived  another  of  similar  quality  and  value.  Sup¬ 
pose  the  old  cable  be  found,  to  whom  would  it  be¬ 
long  ?  Can  it,  or  ought  it  to  make  any  difference 
in  the  ownership,  whether  the  recovery  be  before,  or 
after  the  adjustment  ? 

But  the  Court  deny,  that  the  old  materials  are 

The  court  J 

fid17 materials ^ie  property  of  the  insurer  ;  “it  is  however,1 ”  say 
which  new  they,  “  difficult  to  conceive  how  and  when,  before 
stituted,  are  the  adjustment  of  the  loss,  the  property  in  the  as- 

the  property  J  1  1  J 

oi  ihe  imurer.  sure(]  becomes  devested,  and  vested  in  the  under¬ 
writer.” 

It  is  more  difficult  to  conceive,  how  the  insurer 
should  acquire  a  property  in  the  salvage  after  an  ad¬ 
justment  under  the  new  rule,  than  before  it :  for  un¬ 
der  this  rule,  the  salvage  is  considered  as  belonging 
to  the  insured,  and  so  treated.  On  an  adjustment 
then,  the  insurer  has  paid  nothing  for  it,  and  has  ac¬ 
quired  no  additional  right  to  the  property  by  that  act. 


Suppose  before  the  adjustment  they  are  destroyed  by 
fire,  or  they  are  sold,  and  the  purchaser  becomes  bank¬ 
rupt  ;  or  they  cannot  be  sold  in  the  country  where 
the  vessel  was  repaired,  and  are  shipped  to  another 
and  lost  on  the  passage  ?  In  either  case,  on  whom 
would  the  loss  fall  ?  If  they  are  “  the  property  of 
the  insured,”  and  clearly  belong  to  him,”  the  loss 
ought  to  be  his.  But  if  any  such  event  were  to 
happen,  would  any  Court  or  jury  so  decide? 

The  right  of  property  in  the  old  materials  is  ob- 
taine  d  upon  the  same  principle,  as  a  right  of  prop¬ 
erty  is  obtained  in  all  other  similar  cases.  The  loss 

•  ••  -■  i  -|*i  •  11  The  loss  ini 

in  question  is  a  salvage  loss,  winch  is  a  total  loss  question  was  a 
of  a  part  of  any  subject  insured.  Here,  without  sauncdh™daejJust. 
abandonment,  a  total  loss  of  the  damaged  part  is  materials  are 
paid,  and  the  salvage  is  vested  in  the  insurer.  “  Iny^ughnot 
such  cases,”  ( salvage  losses)  “  though  the  property  abondoncd‘ 
be  not  abandoned  to  the  underwriters,  the  principle 
of  abandonment,  is  assumed,  and  is  in  fact  acted 
upon  ; — the  property  saved  does  not  indeed  actually 
belong  to  the  insurers  as  where  a  regular  abandon¬ 
ment  is  allowed,  but  it  is  to  all  intents  and  purposes 
treated  as  if  it  did,  and  all  the  charges  incurred  are 
born  by  them.  The  principle  acted  on  is  this  ; — 
the  underwriter  pays  a  total  loss,  and  takes  the  pro¬ 
ceeds  of  the  goods.”  (Stevens  on  average,  p.  79.) 

This  applies  to  a  part  of  the  cargo,  not  to  a  part  of 
the  ship  ;  and  there  is  this  difference  between  them — 
in  the  case  of  the  cargo,  the  thing  lost  is  paid  for  in 
money,  not  in  kind — but  in  the  case  of  the  ship,  the 
thing  is  paid  for  by  furnishing  another  of  the  same 
quality  and  quantity. 

“  When  goods,  in  consequence  of  any  of  the  per¬ 
ils  insured  against,  must  be  sold  short  of  their  des¬ 
tination,  and  there  is  either  a  proper  abandonment, 


-  I 


34 

or  the' loss,  owing  to  its  nature,  must  be  treated  as 
a  total  one  without  an  abandonment,  as  when  goods 
saved  from  a  ship  which  cannot  be  forwarded  to  their 
destination,  which  is  a  salvage  loss  properly  speak¬ 
ing,  the  underwriter  must  pay  the  difference  between 
the  value  in  the  policy,  (or  the  cost  &c.)  and  the 
nett  proceeds  of  the  goods.  There  is  no  difference 
between  a  salvage  loss  with,  and  one  without  an 
abandonment,  except  that  in  the  former  the  property, 
after  payment  of  the  sum  insured,  is  transferred  to 
the  underwriters,  and  the  nett  proceeds  divided 
amongst  them  in  proportion  to  their  respective  inter¬ 
ests';  and  in  the  latter  the  sale  of  the  property  is  con¬ 
ducted  by  the  assured,  and  the  underwriters  (who  in 
such  cases  usually  agree  to  a  payment  on  account)  pay 
the  balance  of  the  loss  after  it  is  finally  settled.” 
(Benecke  on  the  Prin.  of  Ind’y  p.  442,  vide,  also, 
Phillips,  Hughes.) 

If  this  be  not  the  character  of  the  loss,  it 
must  be  a  partial  loss,  and  ought  to  be  settled  as 
such.  What  would  be  the  result  of  the  last  case 
stated,  if  settled  upon  this  principle  ?  The  value  of  a 
thing  insured  in  an  open  policy,  is  the  market  value 
of  it.  A  cable  therefore  which  cost  originally  $600 
the  market  value  would  be  -  -  -  -  -  400  00 
II  not  a  sal -  This  cable  is  damaged,  and  sold  for  -  -  200  00 

vage  toss  it  is  a  ° 

partial  loss  _ 

and  ought  to 

that  principle.  The  difference  between  the  sound  and  unsound  is 
50  per  cent.,  which  is  the  loss  to  be  applied  to  the 
if  teuied  sum  insured,  and  this  is  $400,  being  2-3  of  $600. 
The  claim  therefore  would  be  $200.  And  such 

the«,nic  ns  if  would  be  the  uniform  result  in  cases  where  it  could 

adjusted  un 

deMbfU  pe  applied.  The  coincidence  in  the  results  of  this 
mode  of  adjustment,  and  that  contended  for  by  the 
defendants,  show  the  incorrectness  of  the  rule  es¬ 
tablished  by  the  Court. 


35 


Every  part  of  a  ship,  separately  considered,  is  val-  a Shihf.earae  val¬ 
ued  in  the  policy  at  2-3  the  expense,  that  would,  111  icy  at  two 

4  J  %  1  thirds  their 

case  or  loss,  be  required  to  substitute  new.  Thus  oris'lnal?alue* 
a  cable  which  costs  $600,  is  valued  in  the  policy  at 
$400.  If  totally  lost  the  insurers  are  liable  for  this 
sum,  and  no  more.  Nor  are  they  directly  or  indi¬ 
rectly  interested  in  any  sum  exceeding  this  amount — 
the  excess  on  the  expense  of  it  belongs  exclusive^ 
to  the  insurer  as  a  distinct  interest — as  much  so,  as 
if  he  had  lost  an  anchor  of  600  lbs.,  and  had  procured 
another  of  900.  Now,  as  the  salvage  is  derived  only 
from  what  was  insured,  its  value  should  be  deducted 
from  the  amount  only  of  what  had  been  substituted 
to  supply  the  loss.  But  by  the  new  rule  it  is  tak¬ 
en  from  a  larger  sum,  thereby  increasing  the  sum  re¬ 


ceived  beyond  an  indemnity. 

Thus  a  cable  is  lost  costing  -  -  $600  00 

The  old  cable  sells  for  -  200  00 


400  00 

Less  one  third  new  for  old  -  -  133  33 


Then  the  cost  of  the  new  cable  is  -  600  00 

Less  new  for  old  as  before,  -  -  133  33 


$466  67 

Thus  it  appears,  that  the  salvage  which  was  derived 
from  a  loss  of  400  is  applied  to  a  loss  of  466,67.  By 
this  rule  too  the  insurer  sustains  all  the  loss  on  the 

I  old  materials  arising  from  their  damage,  and  wear  and 
tear  ;  and  the  proceeds  are  applied  to  the  purchasing 
of  new  materials,  on  which,  for  the  amount  of  the 
old,  the  insured  makes  no  deduction. 

Let  another  case  be  supposed — a  ship  which  cost 
the  owner  $15,000  is  insured  when  new  at  that  sum. 


36 


As  she  lessens  in  value  by  age  and  service,  so  he 
diminishes  the  sum  at  which  she  is  insured,  until  her 
value  is  $10,000,  when  she  is  one  third  deteriorated. 
Now,  suppose  in  this  state  she  were  to  get  on  shore, 
and  it  would  cost  more  than  50  per  cent,  of  her  value 
to  repair  her  damages,  but  worth  as  she  was  $4,000. 
Suppose,  too,  that  the  insurer  had  a  new  ship  of  the 
same  cost  as  the  other  when  new,  and  in  all  other 
respects  precisely  similar.  This  vessel  he  tenders  to 
the  owner  upon  the  same  terms, he  would  furnish  new 
work  and  materials  to  repair  any  loss  or  damage  to 
the  old  ship.  The  offer  is  accepted.  How  will  the 
account  be  adjusted?  Under  the  new  rule  of  the 
Court  it  would  be  thus ; 

Cost  of  the  new  ship,  -  $15,000  00 

Value  of  the  old  ship,  -  4,000  00 


11,000  00 


Less  new  for  old,  -  3,666  66 

Insurance  of  old  ship,  -  10,000  00 


$13,666  66 

Thus,  the  insured  would  receive  a  ship,  worth 
$15,000  for  which  he  would  pay  but  $13,666  66;  and 
the  difference  between  the  two  sums  is  the  excess 
over  an  indemnity.  “  But,”  say  the  Court,  “a  weight¬ 
ier  objection  to  our  former  decision  remains  to  be  con¬ 
sidered.  It  is  said  to  be  immaterial  to  whom  the  old 
materials  belong,  or  who  pays  the  disbursements  for 
repairs,  because  at  all  events  the  ship  is  made  one 
third  better  by  the  repairs,  and  therefore,  that  one 
third  of  the  gross  expenses  should  be  deducted  or  the 
assured  will  receive  more  than  an  indemnity — and 
this  would  be  true,  if  the  fact  were,  that  such  would 


37 


be  in  all  cases  the  increased  value,  or  if  the  presump¬ 
tion  is  to  be  carried  to  the  extent  the  objection  sup¬ 
poses.”  This  seems  to  be  conceding  the  whole 
ground — for  the  Court  have  admitted  it  to  be  a  rule 
of  law  well  settled,  to  deduct  one  third  new  for  old. 
Can  it  be  denied,  then,  that  a  vessel  is  made  better  one 
third  the  amount  expended  in  repairs  ? — This  would  be 
contending  against  the  rule  itself,  by  which  that  fact 
is,  in  all  cases,  established.  The  Court  add,  “  But 
presumptions  against  facts,  established  for  conven¬ 
ience  are  to  be  strictly  guarded,  and  a  rule  founded 
upon  such  presumptions  is  to  be  confined  to  the  pur¬ 
poses  for  which  it  is  adopted.”  And  is  not  the  ship 
equally  bettered  before  as  well  as  after  the  adjust¬ 
ment,  by  the  repairs  or  new  articles  furnished  ? 

What  connexion  has  the  rule  of  one  third  new  for 
old  with  the  question  ?  The  point  is  whether  that 
one  third  shall  be  applied  to  the  whole  amount  of  re¬ 
pairs,  or  to  the  difference  between  this  sum,  and  the 
value  of  the  salvage.  Now  it  does  not  affect  the 
question  whether  one  third,  one  sixth,  or  any  other 
proportional  part  be  taken  as  the  difference  between 
new  and  old  ;  nor,  whether  the  value  of  the  articles 
lost  or  damaged  be  ascertained  by  estimation  or  es¬ 
tablished  by  law. 

The  Court  say,  “  We  understand  the  rule  to  be 
that  one  third  is  to  be  deducted  from  the  expenses 
of  repairing  the  loss,  and  that  the  loss  is  the  injury 
done  to  the  vessel  which  remains  after  the  proceeds 
of  the  old  materials  have  been  applied.  This  is  the 
loss  against  which  the  underwriter  stipulates  to  in¬ 
demnify  the  assured  and  so  it  was  considered  before 
the  introduction  of  the  existing  rule.  1  Magens, 
193.”  Unfortunately  for  the  Court,  the  authority 
here  cited  is  directly  against  them  on  this  question. 


The  court 
adduce  Ma¬ 
gens  as  author¬ 
ity  in  the  sup¬ 
port  of  their 
doctrine, 
whereas  this 
authority  is 
against  them. 


38 


Case  cited 
by  the  court. 


The  part  of  the  ease  referred  to  runs  thus  ;*  “  The 
translation  of  the  instrument  which  contains  the  re¬ 
port  of  five  persons  appointed  at  the  request  of  the 
captain  by  the  Court  of  Justice  at  Copenhagen, 
shews,  how  they  valued  the  damage,  that  happened 
to  the  ship  and  its  materials  by  running  aground,  and 
by  the  breaking  and  cutting  of  the  cables.  Whereof, 
only  the  following,  being  the  cutting  of  the  cables  is 
brought  here  as  valued  by  them,  viz.” 

“  The  same  weighed  26  ship  pounds  and  were 
worth  15  R’lrs  per  ship  pound,  making  Rix 
Dollars  _____  390  00 

“  Deduct  the  neat  proceeds  of  that  part  there¬ 
of  which  was  saved  and  sold,  being  35:4 


“  Remain  Rix  D’rs  -  -  354:2” 

rk<  By  this  statement,  it  will  be  perceived,  that  the 
value  of  the  damaged  materials  before  the  disaster, 
was  estimated  by  competent  persons,  appointed  for 
that  purpose.  The  rule  of  deducting  one  third,  was 
not  then  in  use.  Instead,  therefore,  of  fixing  the 
value  by  this  deduction,  as  at  the  present  time,  it 
was  then  ascertained  in  that  manner  by  estimation. 
Thus  the  cables  before  they  were  damaged  were 
valued  390.  The  cables,  when  new  we  suppose  to 
have  cost  585.  By  the  present  rule,  one  third  would 
be  deducted  for  wear,  making  their  value  before  the 
disaster  390.  Whether  the  cables  were  more  or  less 
worn,  affects  not  the  question ;  and  it  is  quite  as 
probable,  that  they  were  more,  as  that  they  were 

*  This  is  the  case  of  the  Swedish  ship  Victoria  bound  from 
Cronstadt,  to  Leghorn.  On  her  passage  she  got  aground  and 
was  repaired  at  Copenhagen. |  The  charges  [referred  to  are 
General  Average.  The  cables  and  anchors  were  recovered. 
The  quotation  is  from  a  statement  dated  in  Amsterdam,  1748. 


39 


less.  The  point  of  inquiry  is,  whether  taking  the 
value  of  the  old  materials  from  the  whole  of  the  first 
cost,  or  from  the  value  of  the  thing  at  the  time  of  the 
loss,  was  then  the  rule  f  We  say,  the  authority 
quoted  sustains  the  latter  ;  and  is,  therefore,  against 
the  new  rule  of  the  Court,  and  in  accordance  with 
the  rule  previously  in  use.  They  had  one  mode  of 
ascertaining  that  value,  ive  another  ;  they  by  valua¬ 
tion,  ive  by  deducting  one  third.  Now,  it  is  of  no 
importance,  whether  or  not  these  two  modes  would 
give  the  same,  or  a  different  result.  If  from  this 
result,  however  obtained,  the  value  of  the  old  ma¬ 
terials  is  deducted,  it  establishes  the  point,  that  it 
was  then  the  rule  to  deduct  the  allowance  of  new  for 
old  from  the  gross  sum,  and  not  from  the  difference 
between  the  value  of  the  old  materials  and  cost  of 
the  new.  This,  we  think,  is  manifest — We  claim, 
therefore,  this  authority  for  us,  which  was  adduced 
as  being  against  us ;  and  the  Court,  no  doubt,  will 
respect  it,  as  they  themselves  made  use  of  it,  though 
under  an  erroneous  impression,  that  it  sustained  the 
doctrine  for  which  they  contended. 

The  Court  say:  “  the  salvage  is  no  part  of  the  loss.”  TI,e  >°ss  of 

The  language  of  the  policy  is  “  losses ,”  “  which 
have  or  shall  come  to  the  damage  of  the  said  ship  thing  is  ren- 

0  x  dered  useless 

A  thing  appertaining  to  a  ship  is  lost  to  the  ship,  ®"ed  !"ePara- 
when,  by  the  perils  insured  against,  it  is  irreparably 
damaged,  or  rendered  useless  for  the  purposes  for 
which  it  was  intended  ;  and  it  becomes  necessary  to 
substitute  another.  Thus,  when  a  cable  has  been 
cut,  and  the  remainder  of  it  is  too  short  for  the  gen¬ 
eral  purposes  of  a  cable,  it  is  a  loss  of  a  cable  to  the 
ship,  and  the  insurer  must  furnish  another.  If  a  boat 
be  stove,  or  a  mast  sprung,  or  shivered  by  lightning, 
so  as  to  be  useless  and  irreparable,  it  is  as  much  a 


40 


loss  of  a  boat  or  a  mast  to  a  ship,  as  the  paralysis 
of  a  limb,  is  the  loss  of  a  limb  to  the  human  body  ; 
or  the  withering  of  a  branch,  is  the  loss  of  the  branch 
to  the  tree.  The  ship  would  not  be  seaworthy,  un¬ 
less  the  articles,  which  constituted  a  part  of  her,  and 
have  been  rendered  useless,  were  removed,  and 
others,  that  would  supply  the  deficiency,  substituted. 
That,  which  is  a  daily  occurrence,  hardly  admits  of 
a  question. 

n  old  ma.  Although  the  Court  decide  that  the  salvage  is  no 
0"™“  f„e„  part  of  the  loss  ;  yet,  they  say,  that  a  loss  is  the  dif- 
not  he  claimed  ference  between  the  value  of  the  old  materials  saved, 
and  the  new  substituted.  If  it  be  true,  that  the  old 
materials  saved  form  no  part  of  the  loss,  it  follows, 
that  new  materials  can  never  be  claimed  while  the 
old  materials  remain,  because  there  is  no  loss  of 
these  materials.  Thus  if  thirty  fathoms  of  a  cable 
of  ninety  be  lost  by  cutting,  the  remaining  sixty 
fathoms  are  not  lost,  consequently,  the  insured  can 
have  no  right  to  procure,  at  the  expense  of  the  insur¬ 
er,  more  than  thirty  fathoms  ;  and  if  he  procures  a 
new  cable  of  ninety  fathoms,  he  has  substituted  sixty 
fathoms  of  it  for  a  like  quantity,  which  was  not  lost; 
and  the  insurer  is  chargeable  with  no  part  of  this. 

Although  by  the  decision  of  the  Court  the  old 
materials  are  not  lost,  but  belong  to  the  insured  ; 
yet,  under  that  decision,  new  materials  of  like  quan-  , 
tity,  quality  and  value  as  the  old,  when  new,  may 
be  obtained  in  lieu  of  them  ;  and  the  difference  in 
value  charged  to  the  insurers,  and  to  the  amount  of 
the  old  materials  in  value,  the  insured  receives  new 
for  old,  without  deduction. 

the  insurer  is  If  the  old  materials  belong  to  the  insurer,  they  be-  I 
d"!n/^r d« ..  011 S  t0  "im  absolutely  and  in  kind.  He  cannot  sell  < 
^ioned  by  .he  them  for  underwriters  account,  and  charge  them  with  I 


41 


all  the  losses  of  converting  them  into  money ;  and, 
with  the  proceeds,  buy  new  articles  for  their  account. 

The  Court  told  us,  that  indemnity  is  the  essence  of 
the  Contract  of  insurance  ;  and  so  is  it  the  essence  of 
the  Contract,  that  no  new  thing  shall  be  obtained  for 
another,  that  is  not  lost.  Suppose  a  cable  is  damaged, 
but  none  of  it  lost ;  that  it  remains  the  same  in  weight 
and  length  as  before  the  damage  ;  but  a  new  one  is  ne¬ 
cessary,  and  obtained.  The  old  cable  by  the  doctrine 
of  the  Court  is  no  part  of  the  loss,  and  belongs  to  the 
insured,  of  the  property  in  which  he  is  not  devested. 

What  more  then  ought  they,  the  insurers,  in  any  view 
of  the  case,  to  pay,  than  the  amount  of  injury  by  the 
damage?  But  it  is  plain,  that  if  the  cable  be  sold, 
that  the  value  being  diminished,  not  only  by  this  in¬ 
jury,  but  by  wear  and  tear,  it  will  produce  as  much 
less  as  the  diminution  in  value  from  both  those  causes 
combined  ;  and  it  is  equally  obvious,  that  the  insurer 
not  only  suffers  the  loss  from  those  two  causes  ;  but 
the  proceeds,  being  deducted  from  the  new  cable, 
and  the  third  new  for  old  deducted  from  the  balance, 
he  sustains  a  further  loss,  by  furnishing  that  propor¬ 
tion  of  the  value  of  the  new  cable,  without  receiving 
the  benefit  of  one  third  new  for  old. 

Let  us  examine  the  operation  of  the  new  rule  bv  .  E«n>ma- 
one  other  case  not  of  value  but  of  quantity.  of'qu’imuy356 

No  question  can  exist  that,  if  a  cable  be  rendered nolofTJlue* 
useless  or  irreparable  by  the  perils  insured  against, 
the  owner  has  a  right  to  demand  another  of  the 
insurer.  Suppose  of  a  cable  ninety  fathoms  long 
sixty  had  been  lost  by  cutting,  and  thirty  saved  ;  that 
a  new  cable  of  similar  length  is  furnished  by  the  in- 


4  2 


surer.  How,  under  the  rule  of  the  Court,  would  the 
loss  be  adjusted  ? — It  would  be  thus  : 

The  old  cable  lost  w?as  in  length  -  90  fathoms 

Deduct  the  old  materials,  these  being 

the  property  of  the  assured,  -  -  30  “ 

60  “  , 

The  remaining  quantity  being  furnished, 
at  the  expense  of  the  underwriter  he 
is  entitled  to  a  deduction  of  one  third 
new  for  old,  -------  20  “ 

40  “  ,T 

and  he  is  chargeable  with  forty  fathoms.  In  this 
statement  we  have  adopted  the  formula  of  the 
Court — And  wdiat  is  the  result  P  It  shows,  that  the 
insurers  are  to  furnish  forty  fathoms  ;  that  the  in¬ 
sured  has  30  fathoms,  being  the  remainder  of  the  old 
cable,  which  the  Court  say  were  not  lost  and  be¬ 
long  to  him  ; — These  together  make  seventy  fathoms, 
ten  more  than  an  indemnity  under  the  rule  of  law 
admitted  by  the  Court. 

Now,  this  mode  wrould  be  right  and  equitable,  if 
the  thirty  fathoms  remaining  of  the  old  were  used  in 
the  repair  by  adding  to  them  sixty  fathoms  of  new. 
But  this  is  not  the  practical  operation  of  the  rule,  if 
it  were,  no  complaint  would  be  heard  against  it :  nor 
is  the  operation  and  effect  such  as  they  appear  to  be 
by  the  statement  of  the  Court,  as  this  shows  a  result 
after  the  materials  had  been  converted  to  money. 
The  thirty  fathoms  saved  would  not  be  received  as 
thirty  fathoms  of  cable.  They  would  be  first  sold,  and 
as  many  fathoms,  not  of  old,  but  of  new  cable  as  the 
nett  proceeds  would  purchase,  would  be  considered 
as  the  quantity  to  be  deducted.  Thus,  if  the  thirty 


fathoms  of  old  would  purchase  but  twenty  fathoms 
of  new,  the  twenty  fathoms  only  are  deducted  ;  the 
insured  thereby  receiving  for  the  old  material  new 
without  deduction.  And  the  thirty  fathoms  of  old 
cable,  which  the  Court  say  are  not  lost  but  belong 
to  the  insured,  are  sold  for  the  account  of  the  insur¬ 
er  and  produce  but  twenty,  by  which,  in  effect,  he 
is  charged  with  thirty,  and  receives  credit  only  for 
twenty.  Should  sixty  fathoms  only  of  new  cable  be 


purchased,  and  the  thirty  fathoms  of  old  be  added 
to  it,  in  this  case,  “so  far  as  these  go,  the  subject 
repairs  itself,”  and  “  go  to  reduce  the  cost  of  re¬ 
pairs  and  not,  as  in  the  case  stated  by  the  Court, 
where  they  are  sold  and  not  used  again,  and  conse¬ 
quently  their  place  is  supplied  by  new. 

It  seems  to  be  evident,  that  the  Court  on  this  The  new  rule 

is  established 

point  of  indemnity  have  “begged  the  question.” uPon  an  ex- 

X  J  DO  x  treme  case 

They  maintain,  that  under  the  rule  contended  for  ^wLdant‘ed 
by  the  defendants,  the  insured  wmuld  not  receive  law  prescrib- 

J  ing  one  third 

an  indemnity,  which  is  the  essence  of  the  contract  “snclehebef;«r* 
of  insurance  :  and  to  prove  it,  they  cite  a  case  in  IT.  and  old  1 
which  the  article  damaged,  was  not  one  third  worn, 
which  is  an  extreme  case  in  favor  of  their  position, 
under  the  admitted  rule  of  law  allowing  in  all  cases 
a  deduction  of  one  third  :  then  they  assert  this  is 
not  indemnity  :  thus  using  as  a  medium  of  proof 
what,  if  considered  abstractly,  they  themselves 
would  not  admit  to  be  sound,  and  indeed  have  in 
effect  denied.  If  a  thing  be  totally  lost  without 
salvage,  although  at  the  time  of  the  loss,  it  was 
entirely  new,  they  admit,  that  the  insured  is  indem¬ 
nified  by  the  payment  of  two  thirds  the  first  cost  of 
it  :  for,  they  have  laid  down  as  a  rule  of  law,  that 
one  third  shall,  on  all  partial  losses  on  a  ship,  ex- 


44 


Tl»e  Court 
hive  establish¬ 
ed  a  general 
rule  upon  an 
extreme  case 
assumed  in  fa 
vorofone  par¬ 
ty,  and  which 
will  always 
operate 
against  the 
other. 


cept  on  anchors,  be  deducted  from  the  expences  of 
labor  and  materials. 

Indemnity  is  a  payment  of  the  loss  according  to 
the  contract.  The  indemnity  meant  by  the  law  and 
the  contract,  is  the  only  indemnity  contemplated  by 
the  parties  to  the  contract ;  and  that  can,  either 
lawfully  or  equitably,  be  claimed.  The  lawful  in¬ 
demnity,  is  an  equitable  equivalent.  It  is,  indeed, 
not  only  a  reasonable  supposition,  but  a  fact  suscep¬ 
tible  of  proof,  and  which  has  been  proved,  that  in  the 
aggregate,  the  loss  by  wear  and  tear  exceeds  one 
third  of  the  original  value  ;  consequently,  that  the 
proportion  allowed  on  new  for  old  is  insufficient 
and  it  has  been  shown,  that,  in  all  cases,  where  the 
thing  is  more  than  one  third  worn,  the  insured  re-* 
covers  more  than  he  has  lost. 

But  upon  that  fallacy  the  Court  have  reasoned, 
and  decided  the  question.  On  an  extreme  case  in 
favor  of  one  party,  grounded  upon  that  fallacy,  they 
have,  illogically  deduced  a  general  principle  to  the* 
injury  of  the  other.  Assuming  as  fact,  that  the  rule 
of  law  operates  always  against  the  insured,  they 
have  prescribed  a  new  rule,  which  will  operate  al¬ 
ways  in  his  favor. 

But  the  assumed  fact,  differs  widely  from  the  ac¬ 
tual  fact :  experience  shows,  that  under  the  rule 
of  deducting  one  third  new  for  old,  the  insurer ,  and 
not  the  insured,  is  the  suffering  party.  For  proof! 
of  this,  actual,  not  assumed  facts  will  be  adduced. 

The  small  difference  in  the  value  of  old  and  new 
copper,  renders  the  operation  of  that  rule,  on  a  loss  I 
of  this  article,  apparently  less  favorable  to  the  insur¬ 
ed,  than  on  a  loss  of  others  where  this  difference  is 
greater.  Hence,  the  advocates  of  the  new  rule,  1 
have  usually  selected  this  article  to  show  what  they 


deem  to  be  the  error  of  the  common  mode  of  adjust¬ 
ing  a  loss.  But  even  on  that  their  calculations  are 
uniformly  made  on  the  assumed  fact,  that  the  cop¬ 
per  was  less  than  one  third  worn :  and  without  as¬ 
suming  this  ground,  they  would,  in  every  instance, 
utterly  fail  of  making  even  the  appearance  of  a  case 
of  non-indemnity,  under  the  former  mode  of  applying 
the  rule  of  law.  What  then  are  the  actual  facts  re¬ 
garding  the  loss  of  copper  ?  We  have  examined 
every  case  of  new  coppering  ships,  which  an  Insur¬ 
ance  Company  of  this  city  has  had,  since  they  com¬ 
menced  business,  embracing  a  term  of  eight  years. 
The  whole  number  of  cases  was  seventeen  ;  but 
the  particulars  of  only  sixteen  could  be  obtained. 
By  these  it  appears,  that  the  aggregate  weight  of 
the  new  copper  furnished,  exceeded  that  of  the  old 
copper  saved,  forty-two  and  three  fourths  per  cent,* 
which  was  the  loss  by  wear  and  tear;  consequently, 
the  insurer  has  received  credit  for  thirty-three  and  one 
third  per  cent,  and  been  charged  with  forty-two  and 
three  quarters  per  cent. — by  which  he  has  paid  nine 
and  five-twelfths  per  cent,  more  than  was  loss,  and 
so  much  exceeding  an  actual  indemnity, — the  differ¬ 
ence  being  not  one  third  as  established  by  law,  but 
forty-two  and  three  quarters  per  cent,  as  established 
by  fact.  Such  then  is  the  real  result  evinced  by 
experience. 


* 

o 

Weight  of  old  copper 

50 

CO 

i-h  05  CO 

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05 

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05 

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vj 

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saved. 

r— 4 

o 

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co 

05 

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t- 

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c- 

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05 

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iff 

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iff 

05 

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r  Weight  of  new  copper 

t-o 

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v* 

furnished. 

05 

'ff 

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r— 4 

1—4 

If  it  be  said,  that  a  part  of  the  old  copper  may 
have  been  lost  or  stolen,  it  affects  not  the  argument: 
for,  if  the  vessels  had  been  coppered  at  their  own¬ 
er’s  expense,  we  are  bound  to  believe,  that  the  same 
losses  would  have  been  experienced,  as  the  fidelity 
of  the  agents  employed,  is  not  to  be  questioned : 
Moreover,  if  the  old  materials  do  not,  as  the  Court 
maintained,  belong  to  the  insurers,  that  part  of  them 
which  was  lost,  not  by  the  perils  insured  against, 
ought  not  to  be  borne  by  them. 

The  fact  here  adduced  proves  more,  than  that  the 
deterioration  by  wear  and  tear ,  exceeds  the  propor¬ 
tion  established  by  law.  It  may  be  taken  for  grant¬ 
ed,  and  the  position  will  not  probably  be  disputed, 
that,  when  the  copper  upon  a  ships  bottom  is  dimin¬ 
ished  by  wear  and  tear  one  third  of  the  whole 
original  weight,  the  vessel  then  requires  to  be 
new  coppered  ;  consequently,  of  the  sixteen  vessels 
new  coppered  by  the  insurer,  twelve  of  them,  at 
least,  if  no  accident  by  the  perils  of  the  sea  had 
happened,  required  and  would  have  been  new  cop¬ 
pered  at  the  expense  of  their  owners  :  and,  according 
to  the  loss  per  centum  on  the  aggregate,  not  only 
twelve,  but  the  whole  number,  required,  at  the  time 
of  the  loss,  new  coppering. 

It  may  also  be  taken  for  granted,  that  the  average 
duration  of  the  service  of  copper  is  three  years,  al¬ 
though  its  annual  loss  of  weight  is  but  one-ninth  of 
the  original  quantity  ;  consequently,  every  coppered 
vessel,  after  three  years  service  requires  to  be  new 
coppered :  and  when  this  is  done  at  the  expense  of 
the  insurers,  if  the  copper  had  been  in  use  more< 
than  one  year,  the  deduction  of  one  third  is  less 
than  the  actual  diminution  of  value  by  wear,  in  pro¬ 
portion  as  that  excess  bears  to  the  whole  term. 


47 


Nor  is  that  excess  of  loss  in  the  weight  of  copper, 
the  only  loss  sustained  beyond  the  proportion  estab¬ 
lished  by  law.  The  same  relatiye  excess  beyond  an 
indemnity,  will  exist  in  all  the  repairs  attendant  on 
new  coppering  :  Stripping  off  the  old,  and  putting 
on  new  copper ;  recaulking,  painting,  &c.  are  char¬ 
ges  always  comprised  in,  and  form  a  large  propor¬ 
tion  of  the  expense  of  new  coppering, — these,  and 
in  most  cases,  many  others  are  paid  by  the  insurer. 
If,  therefore,  the  difference  of  weight  between  the 
old  and  new  copper,  be  taken  as  the  criterion  of 
wear  of  those  parts  of  a  ship,  which  must  be  repair¬ 
ed,  when  she  is  new  coppered  ;  the  deduction  of  one 
third  is  less  by  nine  and  a  half  per  cent.,  than  the 
actual  deterioration  by  wear  and  tear. 

The  severity  with  which  the  new  rule  will  oper¬ 
ate  on  the  insurer,  may  be  thus  seen.  For,  he  not 
only  pays  that  per  centage  on  the  sum  expended  for 
repairs ;  but,  by  the  new  rule,  this  excess  will  be 
augmented  by  one  third  the  value  of  the  old  mate¬ 
rials  saved. 

But  the  sum  exceeding  an  indemnity  which  the 
insurer,  under  the  rule  of  the  Court,  is  compelled  to 
pay,  is  not  its  most  objectionable  feature  : — This,  as 
it  increases  the  risk,  may  be  counterbalanced  by  an 
adequate  increase  of  premium.  It  is  being  obliged 
in  adjusting  an  account  to  abandon  a  rule  known  to 
be  right,  and  to  act  by  a  rule  demonstrably  wrong  ; 
for,  we  hold,  while  it  is  admitted  that  the  old  mate¬ 
rials  are,  at  the  time  they  are  lost,  one  third  depre¬ 
ciated  by  wear,  so  long  will  it  be  true,  that  when 
the  insured  obtains  more  than  two  thirds  the  first 
cost  of  new  materials,  will  he  receive  more  than  an 
indemnity  :  and  when  one  third  of  any  given  value 
has  been  lost,  what  is  the  value  of  the  remaining 


48 


two  thirds,  is  a  problem  of  too  easy  solution  to  ad¬ 
mit  of  any  question  in  the  result.  Moreover,  the 
decision  prescribing  this  rule,  in  effect  pronounces 
the  old  rule  to  be  false  ;  the  decision,  then,  is  an  im¬ 
peachment  of  the  morality  or  capacity  of  those,  who 
have  so  long  practically  applied  it  to  the  adjustment 
of  losses. 

We  feel  compelled  here  to  remark,  and  we  do  it 
with  regret  and  reluctance,  that  the  Court,  throughout 
their  argument,  appear  to  have  viewed  but  one  side 
of  the  question, — and  that  the  side  of  the  Plaintiffs — 
All  the  cases  supposed,  are  extreme  cases  on  that 
side.  Why,  let  us  ask,  did  they,  in  all  cases,  take 
the  thing  as  less  than  one  third  worn  ?  and  why,  in 
no  one  instance,  have  they  taken  it  as  more  ? — Why 
did  they  not  fix  upon  the  line  prescribed  by  the  law, 
and  keep,  in  their  arguments  and  stated  cases,  on 
that  line  ?  Why,  after  admitting,  “  that  the  rule  of 
deducting  one  third  new  for  old,  however  construed, 
will  not  always  secure  an  exact  indemnity,  that  the 
assured  will  recover  more  or  less  than  an  indemnity 
according  to  the  age  and  state  of  the  vessel  before 
the  loss,  but  this  imperfection  of  the  rule  is  supposed 
to  be  more  than  compensated  by  its  certainty,  sim-  : 
plicity  and  practical  convenience”  ;  that  “  the  rule  of 
deducting  one  third  new  for  old  was  long  since  sub¬ 
stituted  for  the  ancient  mode  of  adjustment,  and  its 
continuance  for  such  a  length  of  time  proves  its  prac¬ 
tical  utility.  Since  the  introduction  of  the  rule  : 
neither  party  can  question  the  relative  value  of  the  9 
new  and  old  materials,  whether  the  rule  in  a  particu-  j 
lar  case  should  afford  an  exact  indemnity  or  not.'’ 3 
Why,  we  repeat,  after  all  these  admissions,  did  they,! 
in  answer  to  the  Defendants  who  asserted,  that  :  I 
u  the  ship  is  made  one  third  better  by  the  repairs,! 


and,  therefore,  that  one  third  should  be  deducted,  or 
the  assured  will  receive  more  than  an  indemnity,” 
say,  “  And  this  would  be  true,  if  the  fact  were,  that 
such  would  be,  in  all  cases,  the  increased  value,  or  if 
the  presumption  is  to  be  carried  to  the  extent  the 
objection  supposes.” — Is  not  one  third  of  the  repairs, 
the  increased  value  given  by  law  in  all  cases  of  repairs 
upon  a  ship  ?  Is  there  any  presumption  in  assum¬ 
ing  what  the  law  establishes  as  fact?  Why  could 
not  the  Court  have  tried  the  other  side  of  the  ques¬ 
tion  ?  And  have  stated  and  considered  a  case  or  two 
where  the  materials  were  more  than  one  third  worn  ? 
then,  they  would  have  seen,  that,  in  such  cases,  which 
;  certainly  are  no  less  rare  than  the  others,  the  in¬ 
creased  value  by  law,  was  less  than  the  increased 
value  in  fact. 

The  old  rule  of  adjustment  gives,  in  all  cases,  an 
«xact  legal  indemnity  ;  it  operates  uniformly  in  all 
circumstances.  The  new  rule  gives  an  indemnity  in 
no  case  ;  it  operates  exclusively  against  one  party, 
and  for  another  ;  and,  when  the  insurer  by  law  pays 
more  than  is  lost,  by  this  rule,  his  loss  is  made  still 
:  greater.  The  law  considering  the  materials  to  be 
one  third  worn  at  the  time  of  the  loss,  no  other  mode 
of  adjustment  than  that  under  the  old  rule  can  furnish 
a  legal  indemnity ;  or  be  a  correct  rule  of  law — for 
that  cannot  be  a  rule  of  law,  which  counterworks  the 
law  itself. 

We  have  thus,  we  think,  evinced  : 

1.  That  the  usage  contended  for  under  the  policy 
was  not  a  local ,  but  a  general  usage  : 

2.  That  the  usage  is  of  long  continuance,  having 
existed  from  the  time  of  Magens  nearly  a  century 
ago  ;  that  it  was  known  to  the  parties  to  the  con¬ 
tract,  which  was  made  in  reference  to  it: 


50 


3.  That  local  usages  have  the  force  of  law  where 
they  prevail,  if  they  are  well  known  and  long  estab¬ 
lished,  because  they  are  then  presumed  to  have  been 
in  the  contemplation  of  the  parties  : 

4.  That  the  policy  has  reference  to  such  usages,  ** 
as  they  relate  to  the  mode  of  adjusting  losses  : 

5.  That  by  the  terms  of  the  policy  expressed,  and 
by  the  usage  as  known  and  established  and  not  ex¬ 
pressed,  the  insurer  is  not  liable  for  a  loss  by  any 
other  mode  of  adjustment,  than  that  in  use  at  the  time 
of  making  the  policy  : 

6.  That  under  the  new  rule  a  construction  is  giv- 1 
en  to  the  policy,  by  which  the  insurer  is  made  liable  .' 
for  losses,  which  it  was  intended  to  exclude  : 

7.  That  the  unenumerated  losses,  are  such  only  as^ 
insurers  arc  liable  for  by  the  rules  and  customs  of 
Boston: 

8.  That  the  new  mode  of  adjustment  is  repugnant 
to  those  usages  : 

9.  That  the  new  rule  violates  the  spirit  of  the 
contract,  the  essence  of  which  is  indemnity  : 

10.  That  it  violates  a  settled  rule  of  law,  which 
prescribes  what  is  indemnity  : 

11.  That  the  old  mode  of  adjustment  always  gave 
a  legal  indemnity,  but  the  new7  mode  will  always 
give  more  than  such  an  indemnity  : 

12.  That  the  loss  is  a  salvage  loss:  and  the  old. 

& 

materials  saved,  are  virtually  abandoned,  and  belong 
to  the  insurers  : 

13.  That,  if  the  old  materials  belong  to  the  insur¬ 
ed,  the  loss  is  a  partial  loss,  and  ought  to  be  settled 
as  such : 

14.  That,  if  settled  on  the  principle  of  a  partial  - 
loss,  the  result  would,  in  all  cases,  be  the  same,  as 

d  settled  by  the  old  mode  of  adjustment : 


15.  That  a  loss  of  a  particular  thing  appertaining 
to  a  ship,  is  when  that  thing  is,  by  the  perils  insured 
against,  rendered  useless  and  irreparable,  and  its 
place  is  supplied  by  others  : 

16.  That,  if  the  old  materials  do  not  belong  to  the 
insurers,  but  to  the  insured,  the  old  materials  are 
not  lost,  and  others  cannot  be  claimed  of  the  insur¬ 
ers  : 

17.  That,  in  this  case,  the  insurer  is  answerable 
only  for  damage  sustained  by  the  disaster  : 

18.  That  the  new  rule  was  established  upon  an 
extreme  case  assumed,  and  not  warranted  by  the 
rule  of  law  prescribing  one  third  as  the  difference 
between  new  and  old,  in  all  cases  of  partial  loss  on 
ships  : 

19.  That  this  extreme  case  was  on  one  side  ; 
and  the  rule  established  was  intended,  and  actually 
does  operate  always  in  favor  of  that  side,  and  always 
against  the  other : 

20.  That  the  new  rule,  therefore,  is  consistent, 
neither  with  the  policy  nor  usage,  with  law  nor  jus¬ 
tice. 


AN  UNDERWRITER. 


<£>  3  ^2  ^  ye 


